We have been approved a FTB Mortgage, it is one of those 100% mortgages where a parent deposits saves the equivalent of a 10% deposit with the bank for three years, in lieu of a mortgage.
The bank advised us to put in as close to 4.99% as possible, so we agreed 3% - so effectively we are borrowing 97% and my DF is depositing the 10% deposit. He will get this back with interest in three years.
We were advised by the bank to put the something towards the mortgage in the way as a deposit, as a measure of protection against negative equity and with COVID-19 this (to me at least) seems sensible. The bank have confirmed all is going through okay and we are due to complete soon.
My DF is saying NOT to put 3% in and to take the 100% mortgage we were approved. That it makes no difference and that we should keep that money in the bank to protect against any event that we cannot make a monthly payment. I think his motivation is that he is protecting his money this way. He says it makes no difference to us either way.
DH and I are both in secure jobs, in secure industries. About as secure as you can get at any rate, so a sudden drop in income is unlikely however we would both have income protection insurance.
Once we move in and are making mortgage payments, we will still be able to save around 12k per year (sometimes slightly more depending on bonusses etc) and have holidays/a life. We have budgeted carefully and are buying a house that is ready to move into and needs no improvements. Our current savings will be dented somewhat but we will still have several thousand in the bank.
If we borrow an extra 3% (£7850)- we will pay back the interest on that so it is cheaper to do it this way, surely?
Any advice would be gratefully received.