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Property/DIY

5 percent deposit / 95 percent mortgages

7 replies

MagggieMay · 19/03/2018 15:25

Hi, just wondering what your thoughts are on this?

I currently pay 1000 pcm rent, and mortgage would likely be around 600. If I carry on renting for 6 months I could save up a 10 percent mortgage but would waste 6k in rent in this time. I'm looking to buy a property to last around two years as I'll be in a much better financial position after this and can afford something nicer.

Obviously the rates are much higher for a 5 percent mortgage but if I only fix for two years, I will either move or get a new mortgage for the current property with a higher deposit.

Thoughts?

OP posts:
RememberToSmile1980 · 19/03/2018 15:27

I think you should go for it - I agree that you should go with a good rate until you can re-mortgage later. Have you found a property?

MagggieMay · 19/03/2018 15:31

Thanks for your quick reply! Yes I have found somewhere, but am just a bit nervous about 5 percent deposits as on paper the rates are so bad. But I'm unlikely to spend the 6k (on extra interest) in 2 years that I would have saved by moving earlier. And I would have some equity if I move. Also as the house is quite inexpensive I wouldn't be too worried about negative equity.

OP posts:
Bringonspring · 19/03/2018 15:35

I would just consider the cost of stamp duty and the interest on your mortgage

So if your stamp duty is £12 then if your only there for 2 years that has cost you £500 a month. If your interest on your mortgage is £1000 then that is the same as renting.

If however you buy in a location when prices are rising then of course you’ll make money on the house.

mojito55 · 19/03/2018 15:36

Are you interested in new builds at all? If so you can look into the help to buy scheme, the government will loan you the other 5% for your deposit at 0% interest.

MaverickSnoopy · 19/03/2018 16:01

I would also be factoring in stamp duty and conveyancing fees as well as moving costs. You'll be doing it twice so quite a big cost.

MagggieMay · 19/03/2018 16:07

No stamp duty this time as we are first time buyers. Stamp is likely to be minimal next time as it's still likely to be under 200k.

OP posts:
JoJoSM2 · 20/03/2018 18:23

It can take months from offer to completion factor that in - you can start looking when you're still a tad short.

Have you done actual numbers to see how much interest you'd be charged? If it's only, say, 100k you're borrowing, then 1% extra interest will amount to 1k over a year so no point paying thousands in rent to then save 1k on interest.

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