Active discussions

Meet the Other Phone. Protection built in.

Meet the Other Phone.
Protection built in.

Buy now

Please or to access all these features

Talk
AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Buying a house with 5% deposit

38 replies

Silvertincan · 27/10/2019 08:42

Looking to buy our first home, we have worked out if we bought a house for around 180-190k out repayments would be about £750ish with a 10% deposit or £850ish with a 5% deposit. £100 each month doesn't really sound like a big difference to us, but having a spare 10k does!!

I'm desperate to buy sooner rather than later, as we will be paying less that we are renting and for a nicer/bigger property.
Our mortgage will still be over 25-30years (we are young, under 30) but the spare savings appeal much more to me than putting down that extra 5%.

So my question....
What do you think about 5% deposits? Has anyone had any experience doing this who can advise us?

Thanks!

OP posts:
Flyonthewall01 · 27/10/2019 08:52

Have you spoken to a mortgage broker for independent advice? I am currently sorting a mortgage out for a new property (more than 10%) and my broker was talking about how people really should avoid 5% deposits as the interest on the repayments are a lot higher and a lot of lenders won't touch them. You'd also be subjected to tougher financial screening

TheGlitterFairy · 27/10/2019 08:55

I’ve only ever had 20% deposits - better mortgage rate with this also. Go as high as you can deposit wise would be my advice (though please do check with mortgage broker too).

Ponoka7 · 27/10/2019 08:57

My DD did it because like you, her mortgage was going to be cheaper than her rent.

It's why people go for new builds. The deposit is only 5%.

It's for you to work out your figures. Just don't look at the extra 10k as there to blow. Factor in your job security and if you want to ttc etc.

caffeinebuzz · 27/10/2019 08:58

Have you thought about Help to Buy? You can use that extra £100 per month to save and buy back the equity.

Lazypuppy · 27/10/2019 09:01

We did 5% for our first house.most important thing to us was the monthly cost. Didn't really take much noyice of interest rate as was irrelevsnt, as long as we could afford repayments that was the first focus.

Plenty of time to make overpayments, and when you re-rate in 2 or 5 years you may then move into 10% bracket.

Ponoka7 · 27/10/2019 09:01

It also depends on the valuation of the property.

Ny DD touched lucky and got the house cheaper than the value. She has actually since buying got an extra 10k on her mortgage for renovations.

It hasn't made that much difference to her borrowing rate only putting down 5%.

Things vary around the country. We're in the North West. Lenders know they have to give more flexibility and incentives.

SafetyAdvice0FeedWhenAgitated · 27/10/2019 09:02

The 5% deposit isn't just for new builds.

I did it. My rate was little bit higher, but I fixed for 2 years and after 2 years I went on normal low rate with 80%ltv.
We used the money we would otherwise spend on deposit towards works on a house and in process raised value.
Absolutely worth it in my case. But every case is different.

Original poster
Silvertincan · 27/10/2019 09:05

I'm hoping the 10k could allow us to do work on the house, which gives us a bit more freedom with what we buy.
The mortgage I've found is a 3 year fixed at 2.9%, which with a 5% deposit I don't think is so bad, but please correct me if I'm wrong because I've never done anything like this before. We have an agreement in principle for this, with the bank.
We have an appointment with the broker a friend used next week, so we should know more then, but I just want to get some opinions before we go in there.

OP posts:
Whymustyoubringinthebirds · 27/10/2019 09:07

My 1st mortgage was 95% we bought under the home report value at the time and took a 2 year fix, once that came to an end the equity allowed us to drop the LTV to 83%. Totally worthwhile if you are in an area of rising house prices

Also I am a mortgage underwriter for a high Street bank and we do lots of 95% mortgages

BarbaraofSeville · 27/10/2019 09:07

You could pay the higher deposit and then resolve to save the £10k afterwards, as you'll have the double whammy of paying less interest on your mortgage due to lower amount and lower rate.

A bit of pain now could save you thousands over the term of the mortgage. And unless you're desperate for the £10k now, what's it going to be doing apart from sitting in a bank account?

badgermushrooms · 27/10/2019 09:08

I did it. It was fine. It's really not as unusual as the "I saved 20k all on my own aged 22 just by cutting out avocados from the weekly shop" brigade like to make out.

I used a broker as I had a couple complicating factors, so while the pool of lenders was limited it really didn't feel like an uphill battle and I absolutely didn't have to go through lots of extra scrutiny.

I haven't got the world's greatest interest rate but I'm still paying £200 a month less than I was in rent so even aside from escaping the awfulness of private renting I'm counting this as a win.

Longer term I'll obviously be able to switch to a better product as I build up equity. In the meantime I'm paying money into my own home rather than someone else's retirement plan.

Original poster
Silvertincan · 27/10/2019 09:08

@Ponoka7 That's good to know, we are in the North West too. I don't really understand the impact of interest rates if I'm honest. I know it impacts the repayments but I thought that you could change mortgage deals after your fixed rate had expired.

OP posts:
SandraOhshair · 27/10/2019 09:10

Adding the 10k to your mortgage will cost so much more (cant do the maths tho). It would really be better to put the largest deposit you can possibly get.

SafetyAdvice0FeedWhenAgitated · 27/10/2019 09:10

It's not bad. I had 3.9 too. Then went to 2.1.
For me that few years on higher rate were absolutely worth it in a long term. And because I seriously needed new kitchen😁
Only thing is. If you are somewhere where prices are falling, be careful not to end up in negative equity. Prices around me are rising, and we bought for bit less than houses around were going so it was safe.

BarbaraofSeville · 27/10/2019 09:11

2.9% is quite high for a mortgage these days. Are there any fees on top?

If your deposit was 10% you'd probably get closer to 2%, so pay a lot less interest over time.

Original poster
Silvertincan · 27/10/2019 09:12

That's my worry, I feel like people are jumping on the north west at the moment, because it's cheaper here than in other parts of the country, making the prices climb drastically. We are buying in a nice area also, so hopefully that helps!

OP posts:
SafetyAdvice0FeedWhenAgitated · 27/10/2019 09:13

Sorry. 3.1, not 3.9😮

Original poster
Silvertincan · 27/10/2019 09:14

@BarbaraofSeville that's directly from a high street bank, so hoping the lender will offer us something more competitive. We can afford 2.9 though, it's less than our rent, which is madness Shock

OP posts:
BarbaraofSeville · 27/10/2019 09:16

I know it impacts the repayments but I thought that you could change mortgage deals after your fixed rate had expired

You can, but you're reliant on house prices not dropping. If you have a 95% mortgage and prices drop, you won't qualify for a new deal and will have to pay the standard variable rate so it's worth checking what that is.

With all the Brexit nonsense going on, who knows what's going to happen over the next few years?

Meshy23 · 27/10/2019 09:21

We did it in London with a 3.6 fixed. We then changed rate to a 2% fixed two years later as we had reached LTV of over 10%. Now have an LTV of 20% so don’t regret it at all as enabled us to get onto ladder in what was a crazy market.

Obviously there are risks of getting into negative equity in a downturn so you should check you can make overpayments without penalty. Definitely speak to a broker who can access the best deals and check Ts and Cs

youreajetalltheway · 27/10/2019 09:21

You really need a broker, they have access to products you don't, and could save you a fortune. Many don't charge fees. London and country give free telephone advice. 35 and 40 year terms are now commonplace, you could reduce your payments in the early years but then overpay or reduce the term later.

This article is really interesting: www.thisismoney.co.uk/money/mortgageshome/article-7579981/Buying-instead-renting-home-leave-352k-richer.html

Maydayredalert · 27/10/2019 09:23

You may be saving 10k now but what about long term. Look at how much you'll be paying over the 25 years in interest for both options and I'll bet the difference is a lot more than 10k!

MereDintofPandiculation · 27/10/2019 09:24

I know it impacts the repayments but I thought that you could change mortgage deals after your fixed rate had expired. You can - but there's no guarantee that you can find a deal which matches your current one. There's a lot of sense in increasing the deposit, because you have no knowledge of and control over what your repayments will be in the future.

The smaller your deposit, the smaller drop in house prices has to be before you find you owe more on your mortgage than the house is worth - meaning you can't afford to sell it because selling it won't clear your mortgage.

A nice area helps to sell - think how long you're going to be in the house - as long as the area is nice enough, if you're going to be in the house for 10 years or more , ease of resale isn't quite so important, whereas a house that meet your needs is more important. We're in a nice town, but we're not in the expensive "nice" Arts and Crafts estate - and I'm very happy because we have a bigger house and a bigger garden so it's a lot easier to actually live here. On the other hand, had we been intending to move up the ladder within 3 years, the Arts and Crafts estate would have been the better choice.

BarbaraofSeville · 27/10/2019 09:26

Hasn't it always been the case that it's cheaper to buy than rent?

Our first mortgage was £180 pm and to rent the same type of house in the same area would have been double each month.

ShadyFP · 27/10/2019 09:28

We put down a 5% deposit because we knew it would take us a lot longer to save 10% (my pay was about to drop, our rent was about to increase). Our mortgage advisor was great, and found us a mortgage we were unlikely to be rejected for. He also advised us to take it over 35 years as we were in our 20s at the time so we might as well. The mortgage he found also came with a cash back bonus that covered his fee, so his advice was essentially free for us.