First time buyer, mortgage and deposit advice
Discussion
I'm looking at buying my first house, hopefully some time this year. I've always been told to get a decent sized deposit to get a good rate on your mortgage.
Max budget is around £175k. At the moment I have roughly a 5% deposit.
What I'm struggling with is whether or not a big deposit is best. If I get a 95% mortgage at 5% interest or a 90% mortgage at 4% a year later the savings would be offset by a 1% rise in house prices?
By that logic I'm best off buying a house asap as long as I'm comfy with the repayments.
Also, I'm assuming with interest rates as they are, a decent length fixed rate is the way to go? Any advice appreciated.
Max budget is around £175k. At the moment I have roughly a 5% deposit.
What I'm struggling with is whether or not a big deposit is best. If I get a 95% mortgage at 5% interest or a 90% mortgage at 4% a year later the savings would be offset by a 1% rise in house prices?
By that logic I'm best off buying a house asap as long as I'm comfy with the repayments.
Also, I'm assuming with interest rates as they are, a decent length fixed rate is the way to go? Any advice appreciated.
Naturally the bigger the deposit the better. Bigger deposit equals lower rates, lower monthly payment, more choice of products and lenders and generally less risk.
What you need to factor in though is how long it will take you to save the extra 5% or 10% deposit? If it takes you another 12 months and you are renting, is it worth paying another 12 months rent to get another 5% deposit?
90% purchase rates are currently circa 3.99%+ and 95% rates start at 4.69%.
Therefore is it worth saving for the additional 0.70% saving on the rate? In my opinion it's not....
What you need to factor in though is how long it will take you to save the extra 5% or 10% deposit? If it takes you another 12 months and you are renting, is it worth paying another 12 months rent to get another 5% deposit?
90% purchase rates are currently circa 3.99%+ and 95% rates start at 4.69%.
Therefore is it worth saving for the additional 0.70% saving on the rate? In my opinion it's not....
For a bit of context I'm living with my parents so minimal rent. Decent wage so can save around £1000/month comfortably. However, although I get along well with my parents I am 25 and find myself wanting my own space more and more.
Not done any serious calculations on total living expenses (mortgage/bills/food etc) but I'd guess around £1500/month? £8-900 on mortgage?
Just wondering if my savings will grow quicker than house prices. A 2.8% 85% LTV is fine now but if that becomes 4% this time next year when I have 15% deposit and house prices are a few % more then I'll have lost out.
Not done any serious calculations on total living expenses (mortgage/bills/food etc) but I'd guess around £1500/month? £8-900 on mortgage?
Just wondering if my savings will grow quicker than house prices. A 2.8% 85% LTV is fine now but if that becomes 4% this time next year when I have 15% deposit and house prices are a few % more then I'll have lost out.
As far as 95% or 90%, then 90% of course gives more choice and will also mean you can consider fixing for longer to not have to worry so early about a new deal either. You already know that 15% deposit gets you to a better position still.
I think if you believe interest rates are going to rise and house prices too, then it makes sense to buy sooner rather than later. Crustal ball time as to when it will be too late.
At the risk of openly advertising, I am an Independent Mortgage Broker who is happy to have a chat if you want.
BTW with the government kicking money to the lenders in various ways (government guarantees and lending them money too) the rates currently on offer have never been so good. As an example of circa Jan 2013 to 3 months later I had a client have the rate we could get at 90% go from 5.39% to 4.44% simply because of a 'freeing' up of rates as a result of different things going on (this was the same lender offering both example rates and me switching from one to the better prior to him completing the purchase).
In my opinion the low rates will not last forever, various factors could lead to increases, NOT just the bank base rate being reviewed upwards for instance. Saying that, I think the year will be a busy one (for us) and I'd be surprised if there were any major changes (except house prices gathering pace) this year.
I think if you believe interest rates are going to rise and house prices too, then it makes sense to buy sooner rather than later. Crustal ball time as to when it will be too late.
At the risk of openly advertising, I am an Independent Mortgage Broker who is happy to have a chat if you want.
BTW with the government kicking money to the lenders in various ways (government guarantees and lending them money too) the rates currently on offer have never been so good. As an example of circa Jan 2013 to 3 months later I had a client have the rate we could get at 90% go from 5.39% to 4.44% simply because of a 'freeing' up of rates as a result of different things going on (this was the same lender offering both example rates and me switching from one to the better prior to him completing the purchase).
In my opinion the low rates will not last forever, various factors could lead to increases, NOT just the bank base rate being reviewed upwards for instance. Saying that, I think the year will be a busy one (for us) and I'd be surprised if there were any major changes (except house prices gathering pace) this year.
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