Only 5% deposit on house number 2. Stupid idea?

[coffeeandapastry]

Hi,

I already have this running in chat, but probably should have tried it here first

Firstly, when I say "house number 2", I don't mean second home (I wish!) I mean our next house.

So we bought our first house 3 years ago with a 5% deposit. Would have obviously preferred a bigger deposit, but that's just where we were financially and we were just desperate to get on the ladder, as we were both early 30's by this point.

This was a 3-5 year house, but we soon realised that the area wasn't really for us and I really don't want to live here anymore. I actually find it depressing.

We've been on the market for a couple of months now and have already reduced. One silly offer, which we obviously rejected, but nothing before or since. We're considering another reduction, but with the houses we were looking at, this would mean we'd probably only have another 5% deposit, rather than the planned 10%.

The sensible thing to do is to probably take it off the market, save our arses off until spring next year and re market with a bigger deposit. Problem is, we're wanting to extend our family and given I'm now mid 30's, I don't want to wait much longer. We can't have a baby where we are, it just wouldn't work.

DP is a high earner, so we can afford a high mortgage, but that doesn't mean it makes financial sense for the future.

This next house wouldn't be our 'forever home' and is likely another 5 year house.

What should we do? I'm really not happy where we are, but I don't want to make a huge financial cock up. I honestly don't know what to do.

TIA

If your DH is a high earner just save some more before moving. You'll get a crap mortgage rate at just 5%. A next home with a 5% deposit is just a bad idea all round. Save like crazy and you can always start trying for a baby at the beginning of next year

Don’t buy at 5% unless you get a significant discount to the market average. I’ve made the mistake of doing that and can’t sell without being in negative equity. If we have market crash which unfortunately is looking likely, we’re stuffed.

You can have a baby where you are, you'd just rather not. I have 3 kids in a 2 bed. Its not ideal but its possible to make things work in the short-medium term.

If your DH is a high earner, you are already in a fortunate position. Knuckle down and save until this time next year then try the market again. In the meantime, see what happens with the baby.

I am not a fan of 5% deposits because you get high interest rates. Having said that, if you can get a 5% mortgage then why not. You can always overpay so that when it comes to remortgaging, you’ll have a much better loan to value.

Have you not had any viewings on the current house or do people discount it after they had viewed?

Thanks so much for the replies so far.

Rose, you're right. Of course we could have a baby here, but it would be far from ideal. I'm not bothered about how if would impact us, but I worry about my DD who is 12 and could do without a screaming baby in a house which is apparently made out of cardboard! She wouldn't get any sleep. You can hear someone whisper in the next room We were planning on trying in January/February time.

JoJo, we've had A LOT of viewings and no real negative feedback, other than the kitchen needs a bit if modernisation, which it does, hence the reduction.

We were having new photos taken today with the idea of reducing further this week, but the more I think about it, the more I think it's just not doable.

DP agrees a 5% isn't ideal, but is confident we could afford higher interest rates and is set to get another pay rise at the beginning of next year, plus shares etc, so there should be a decent buffer.