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Can someone cleverer than me, help with these sums?

49 replies

sumshelp · 07/02/2026 16:10

My son is looking to buy his first flat. The Home report value is £160k, but to get it we are going to have to offer about £170k - very common here as property gets snapped up fast.

We know the mortgage lender will only lend £160k because that's what the home report value is, so the extra £10k will be added by his Dad and me (we are divorced, so £5k each).

These are our mortgage options :

Mortgage 1 - requires a 5% deposit @ £8k
Lender lends £152k
We add £10k
Int rate is 4.79%
Initial term 2 years

Mortgage 2 - requires no deposit (Barclays family springboard mortgage)
Lender lends £160k
We add £10k
Int rate is 5.29%
Initial term 5 years

By my calculations, the Mortgage with the higher rate will cost an extra £4k in interest, over the 5 year term. However, it could be argued, that if the £8k was invested (instead of being used as a deposit), it could earn a similar sum. But am I missing something here, as he would have a lower balance too if he did supply a deposit?

Just ruminating it all over, because if DS puts in £8k, it wipes out of all his savings.

NB. Barclays family springboard mortgage would require me to deposit 10% of the mortgage balance into a savings account with them. So that's £16k for 5 years, and the rate is good. I can do this, and I save with Barclays already.

Help!

OP posts:
properlyproper · 07/02/2026 16:15

Sorry I can’t help but if you copy and paste into chat gpt it’ll tell you everything and more. Try it honestly.

museumum · 07/02/2026 16:40

With the first option he/you start out owning more of the flat so if prices stagnate or drop you’re less likely to get into negative equity issues. I’d always go for that personally.

museumum · 07/02/2026 16:44

Mortgage 1 should have lower monthly payments by quite a bit - do you not have those figures? It will be about £100 less per month I think if the term is the same. Again that feels personally to me better and Ds can rebuild his savings with lower monthly outgoings.

sumshelp · 07/02/2026 16:54

I just pasted this into Chat GPT and it has given some great things to consider. It thinks that option 2 is better

OP posts:
InveterateWineDrinker · 07/02/2026 17:28

If you offered me an investment vehicle which promised a 50% return in five years on the £8k I'd (rightly) assume you were a fraudster.

RosesAndHellebores · 07/02/2026 17:39

You have made one fatal mistake. The options are your son's, not yours.

If interest rates come down, your son is locked into a higher rate for five years. If they go up, there is a five year safety net. That's where your son's research needs to be focused.

Cheersminesalargeone · 07/02/2026 17:47

Get son to put some of his 8k in. When we got our first mortgage 45 odd years ago we literally everything we had in it even sold our car.

Mirrorxxx · 07/02/2026 17:59

Is it your son or you buying? You say we a lot

mondaytosunday · 07/02/2026 18:02

I don’t believe investing £8k will earn you £4k in five years! The closest would be on the ‘best rate’ of 4.5% is £1,970 in compounded interest. If you don’t touch it. Plus would you actually invest it or spend part of it on … this or that and perhaps a holiday or fixing your car/leaking roof (these things do crop up).

NotDonna · 07/02/2026 18:09

mondaytosunday · 07/02/2026 18:02

I don’t believe investing £8k will earn you £4k in five years! The closest would be on the ‘best rate’ of 4.5% is £1,970 in compounded interest. If you don’t touch it. Plus would you actually invest it or spend part of it on … this or that and perhaps a holiday or fixing your car/leaking roof (these things do crop up).

I think OP means investing not saving. But OP, 5 years isn’t long for an investment - ok so S&P500 may give you a 8% return but it could also crash. 5yrs wouldn’t quits be long enough to ride out storms. Even a global index could give you good growth but again 5yrs is pushing your luck a little. If he can afford to leave it in longer & in a tax wrapper then…

NotDonna · 07/02/2026 18:16

InveterateWineDrinker · 07/02/2026 17:28

If you offered me an investment vehicle which promised a 50% return in five years on the £8k I'd (rightly) assume you were a fraudster.

There’s zero promises with investments. Sadly. There’s risks and the OP could lose the full £8k if poorly invested or there’s market crashes etc etc but it could also grow very well. There’s definitely 50% growth possible over 5 years in some S&S. If the fund grows by say 10% per year then it could absolutely be £12-13k after 5yrs. But it could also be a lot less.

InveterateWineDrinker · 07/02/2026 18:25

NotDonna · 07/02/2026 18:16

There’s zero promises with investments. Sadly. There’s risks and the OP could lose the full £8k if poorly invested or there’s market crashes etc etc but it could also grow very well. There’s definitely 50% growth possible over 5 years in some S&S. If the fund grows by say 10% per year then it could absolutely be £12-13k after 5yrs. But it could also be a lot less.

Indeed, but where the alternative is the certainty of an extra £4k in interest payments, the sensible comparison would be a guaranteed return of £4k with no risk to the capital, which would require compounded growth at about 8.45% on the £8k.

Ohfudgeoff · 07/02/2026 18:28

What's your son's attitude to risk?

AlcoholicAntibiotic · 07/02/2026 18:35

Does he have sufficient savings beyond the £8k to pay for fees associated with the purchase / anything that might be needed to be done immediately (not cosmetic work)?

For instance, I knew when I bought my property that it was likely to need a new boiler within the next couple of years so made sure I kept enough back in case that was needed earlier than planned.

Pepperedpickles · 07/02/2026 18:38

Why on earth are you and his Dad putting in £10k when he has £8k in savings, that’s madness.

AlcoholicAntibiotic · 07/02/2026 18:39

Pepperedpickles · 07/02/2026 18:38

Why on earth are you and his Dad putting in £10k when he has £8k in savings, that’s madness.

Perhaps because they want to help their son? Why is that mad, if they can afford it?

Pepperedpickles · 07/02/2026 18:42

AlcoholicAntibiotic · 07/02/2026 18:39

Perhaps because they want to help their son? Why is that mad, if they can afford it?

I understand that - I have an adult dd myself - but I think it’s good for young adults to put everything into their first home and be as self sufficient as possible. It’s a good lesson to learn, and Mum and Dad can still help if there’s a real problem.

Soontobe60 · 07/02/2026 18:57

I’m wondering where you live to have already got a Home buyer report with a valuation before even putting in an offer?

justtheotheronemrswembley · 07/02/2026 19:03

Always borrow the least you can, at the lowest available interest rate.

Always borrow from your own funds instead of borrowing from a lender. The amount of interest you lose on savings will be far less than the amount of interest you would have to pay if you borrowed it instead.

My suggestion would be number 1.

However, the best plan would be to speak to an independent financial adviser (IFA), not a mortgage broker, particularly since you are using some of your own funds. Take their advice.

NotDonna · 07/02/2026 21:30

I’m assuming he has an emergency fund, can cover stamp duty, conveyancing as well as other buyer costs & the deposit?

Merrow · 07/02/2026 21:35

Soontobe60 · 07/02/2026 18:57

I’m wondering where you live to have already got a Home buyer report with a valuation before even putting in an offer?

Normal in Scotland.

Bunnycat101 · 08/02/2026 11:19

I’d be happier with option 1. The second is a high interest rate for 5 years. Often when you are starting out it can be better to have a shorter fix to build a bit of equity and then hope you’re in the next ltv bracket for remortgaging. Locking in a high rate for 5 years could cost your son quite a bit down the line. I also think people should be putting down their own deposit. If getting to 5% is a struggle I’m not sure he’s properly ready for the unexpected costs of home ownership.

user1498809986 · 09/02/2026 19:00

As first replier said, try it in chatgpt. I put it in and this is what it said.

You’re not missing anything obvious — you’re already thinking about the right trade-offs. The decision here isn’t just “which interest rate is lower”, it’s about cash flow, risk, flexibility, and family exposure. Let’s walk it through calmly.

First, let’s restate the two options cleanly

🏠 Purchase

  • Home Report value: £160k
  • Likely purchase price: £170k
  • Family contribution: £10k (gifted from parents)

Mortgage 1 – 95% LTV (with £8k deposit)

  • Deposit from your son: £8k
  • Mortgage: £152k
  • Interest rate: 4.79%
  • Fixed for: 2 years
  • Loan size is lower from day one
Pros
  • Lower interest rate
  • Lower monthly repayments
  • Smaller mortgage balance → less interest overall
  • More equity immediately
Cons
  • Completely wipes out his savings
  • Only fixed for 2 years → remortgage risk fairly soon
  • Less financial buffer if something goes wrong

Mortgage 2 – Barclays Family Springboard

  • Deposit from son: £0
  • Mortgage: £160k
  • Interest rate: 5.29%
  • Fixed for: 5 years
  • You place £16k in Barclays savings for 5 years
Pros
  • Son keeps his £8k savings as an emergency fund
  • Longer 5-year fix = stability and certainty
  • No risk of needing cash for repairs, moving costs, life events
  • After 5 years, your £16k is released (assuming no arrears)
Cons
  • Higher interest rate
  • Larger mortgage balance throughout
  • You are tying up £16k for 5 years (even if the savings rate is decent)

About your £4k “extra interest” calculation

Your instinct is basically correct, but there are two important nuances.

1️⃣ Yes — higher rate + higher balance = more interest

Over 5 years, Mortgage 2 will cost several thousand pounds more in interest than Mortgage 1. Your £4k estimate is in the right ballpark.

2️⃣ BUT the £8k deposit has an
opportunity cost

If your son:

  • Keeps his £8k
  • Invests it modestly or even just holds it as cash
  • Avoids borrowing short-term money later (credit cards, overdraft, family help)

That £8k has real value beyond “interest maths”.

Also important:

  • A wiped-out savings account is risky, especially for a first flat
  • First-year ownership costs always surprise people (furnishings, repairs, service charges)

The key question isn’t interest — it’s
risk tolerance

Here’s the heart of it:

Mortgage 1 is
financially cheaper
…but financially tighter.

Mortgage 2 is
financially more expensive
…but emotionally and practically safer.

For a first-time buyer, especially a young one, that safety is not trivial.

About your £16k Barclays savings deposit

This is actually a strong point, not a weakness:

  • The money is still yours
  • It earns interest
  • It’s not spent, just locked
  • The risk is limited to your son defaulting (which you presumably judge unlikely)

Compare that with:

  • £8k of your son’s savings being permanently gone on day one

One more thing people often overlook

After 5 years on Mortgage 2:

  • He should have a solid repayment history
  • His LTV will be lower
  • He can remortgage to a much better rate
  • Your £16k comes back

Mortgage 1 forces a remortgage after 2 years, possibly in a worse rate environment.

My balanced take (not advice, just perspective)

If this were purely numbers, Mortgage 1 wins.

If this were my child buying their first flat, I’d seriously lean toward Mortgage 2, because:

  • Empty savings + homeownership = stress
  • Life happens
  • Stability for 5 years is hugely valuable
  • Your £16k isn’t lost, just parked

You’re not being financially naïve at all — you’re weighing security vs efficiency, which is exactly what good decisions look like.

If you want, I can:

  • Roughly model monthly payments side-by-side
  • Talk through “what happens if he sells in 3–5 years”
  • Help you sanity-check whether £170k is stretching him too far

Just say the word

hope that helps!

Myotherusernamesafunnyone · 09/02/2026 19:44

Option 1 seems far better to me for all of the reasons stated. You are unlikely to achieve £4000 return on your investment plus looking at the sums only over the 5 year term is misleading. The cost over the life of the mortgage tells you much more as you are borrowing less to begin with and you monthly payments will then be less for the entire term.

DeedlessIndeed · 09/02/2026 20:30

Soontobe60 · 07/02/2026 18:57

I’m wondering where you live to have already got a Home buyer report with a valuation before even putting in an offer?

Scotland does a Home Report (basic survey) at the cost of the seller so that all potential buyers know what they are getting into BEFORE making an offer.

It is easier this way because you need a solicitor to offer. It also avoids the madnes that you get in England, where buyers have to make an offer and then pay for their own survey, sometimes to then realise they cannot afford repairs or wish to renegotiate. Then whole chains can collapse.

So it speeds things up. However the Home Report isn't always that great, sometimes you do want an additional survey.