99% mortgages…

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Sorry if there’s already a thread.

New product launched for first time buyers yesterday where only a £5000 deposit on any property price is needed. The rate is fixed for 5 years and 5.99%.

We are still renting and have a bigger deposit than £5000 but honestly the difference in rate if we put more money down is negligible.

If we put down £15000 the rate is probably 5.5%. If we put down £5000 it’s 5.99%. Not a massive difference and our spare deposit cash could be better used (ie over maternity leave now we have a baby on the way).

So long as we buy a house we are happy to stay in for a while, to avoid negative equity, is there any catch I can’t see?

If your mortgage repayments were going to be cheaper than your rental AND you weren't planning on moving any time soon then I'd be tempted to give it a go.

I had a 100% mortgage back in the early 00's and wouldn't have been able to buy without it. We've only moved once since. What's your local market like?

What is your LTV? I can see 5 yr mortgage at 4.19% on the market at the moment.

5 year fixed rate, not term.

Our rent is only £650, mortgage would be about £1100 (about 25% of our total income). It’s a lot more obviously but affordable in the broker’s opinion.

That's how I bought my first house. The only stumbling block I had was because the house was a period property and needed work doing to it so the mortgage company but a retention on the mortgage. All was fine in the end as my estate agent negotiated with the mortgage company but just something to look out for if buying an older property.

I would be enormously concerned about the potential for negative equity with that LTV in this market.

Does that matter so much if you stay put in your house?

No, but it does reduce your options should circumstances change.

We had an apartment that was in negative equity, we were able to rent it out when it was time to move on, but it does limit your options.

Definitely a risk you need to be aware of. Would the house still suit if you had more DC, needed to move jobs etc?

Where is this please?

It could cause issues when you need to remortgage. Five years isn’t such a long time.

Everywhere. YBS/Accord is the lender.

Beware negative equity, but if the house is a good price and you're planning to stay there for a long time then it might be worth a go.

We bought our first house with a 105% mortgage (I know!!) but it did get us on the property ladder...

Interest rates are predicted to start going down from mid/late 2024 and continue going down throughout 2025. Obviously this is only a prediction, but if interest rates start going down you could be stuck paying hundreds of pounds extra for 5 long years.

How much would a 2/3/5 year fix be if you put 10% down then you would still have some savings left?

I've had a high LTV mortgage twice. Bought my first flat on a 100% mortgage - worked out well as I sold it a couple of years later for a 25% profit.

A couple of years later due a change in circumstances I had to do the same again. However at this point the market had totally changed and when we needed to move after not very long there, we were in negative equity and unable to sell without taking a loss.

Basically it's a risk either way - sometimes it'll work out really well and sometimes it won't. I'm honestly not sure you can have certainty, it probably comes down to your attitude to risk!

I don't think it's a bad idea if I planned to stay for at least 5 years, ideally longer.

I'd be more wary buying a new build though as they often lose the most money within the shortish term, unless the market is rising sharpish in that area at the moment.

I would be very cautious if you were buying a new house as these devalue a bit like when you drive a new car out of a show room. Even if not new, there is still a negative equity risk in 5 years when remortgaging.
I wouldn't rush into anything. We bought our first house when I was pregnant and our jobs changed and we ended up having to do silly commutes (house had devalued in 2008 crash so we eventually sold at a loss). Sounds like u would be more stretched financially by buying, and you wouldn't be saving money as your rent is so cheap. If the rental is good enough then stick with that. If it is a massive difference in quality of life then it is worth taking the house price gamble.

We also got on the ladder this way. 95% mortgage topped up by a loan taking us to 125%, actually! We weren't ever in negative equity but when we sold after 10yrs we didn't make much. Dh still gripes about that. However we'd never have saved a deposit while renting, so I maintain we wouldn't have got in the ladder without it.

Thank you for this. Our rental is a lovely little two bedroom newish build and we are with a housing association. Great area. It does tempt me towards staying x

My concern would be the high interest rate for that duration and your change in circumstances. With a baby on the way, you might find that one or both of you want to explore flexible working requests on your return to work and work isn’t accommodating. I moved jobs during maternity leave and that job move allowed us to move a cheaper area, getting more house for our money. Had we moved before baby we’d have had to stay in the area we were.

You’re in a housing association house and rent is low. You aren’t at risk of being evicted and have more security than most rentals. I would stay put until you’ve gone back to work, save in the meantime or try not to dip into your savings on maternity leave and then look. You might want to fix for 5 years after that even if interest rates are predicted to come down (we did) because we wanted the security we could pay the mortgage and childcare costs.

With your update I would suggest staying. As above, it is a secure cheap rental that you seem fond of.

In terms of money, I've keyed in your figures into a mortgage calculator assuming a £175k property, 5k deposit, mortgage over 25 years. After 5 years you would have paid 66k in payments and paid off 17.2k of your mortgage (so 48.8k paid in interest). Over the same time period you would have paid 39k in rent. Plus you will be responsible for various repairs, moving costs etc

If I were you I would stay put, enjoy your baby and have more money in the bank.

Just wow! Thank you for this, I had absolutely no idea. That’s just crazy. Shows buying isn’t always better than renting

Having seen you have a HA property, dont give that up, unless there is a really pressing reason why you want your own property (and theres nothing wrong with that, I wouldnt want to rent personally) but you are more secure than either private renters or most mortgage holders!