100% (or thereabouts) mortgages

[DR91]

Hi, me and my partner have pretty good jobs and both earn over the national average, we rent and have done all our adult lives out of necessity, when we lived with our parents we paid them a lot of rent too in comparison to our then income. Saving anything like a deposit has just never seemed possible and I truly don’t think it ever has been really.

We can save well, but saving £20k+ just seems like something that’s never going to happen and in the meantime we’re blowing a stupid about of money on rent each month. I’m reading up about mortgages that require under a 10% deposit but I’m seeing all kinds of conflicting information on them. We have jobs that are extremely secure and minimal debt/unnecessary outgoings. Is it still daft to consider a mortgage with a deposit that’s <10% or even <5%? I’m desperate to get my own place but it feels like it just will never happen currently.

We have done this year. Property two bedrooms was £220,000 and we put £11,000 on it as a deposit and we saved over 3 years (we were renting too so hard to save). However our total savings were around £16000, you’ll need solicitors fees, survey etc so you will need a couple or grands on too of deposit.
interest arent great we managed 5 years fixed at 4.6% …

Decent salaries
just the two of you
minimal debt and outgoings

why can’t you save?

We had a 100% mortgage on our first house back in 2001. We borrowed well within our means so had rates gone up we would have been fine.

Are you saying that a mortgage for what you’d want is a lot less than what you are currently paying in rent?

Going at it the other way:
Owning houses can be expensive. Things like heating failures, blocked drains etc - things you currently call the landlord for - need paying for by you. So, what is a mortgage repayment for 95% mortgage on the houses you are looking at like in comparison to your current rent? Will you be able to save faster, and ideally overpay once you have rebuilt some savings, once you own?

I would also look at why you can't save on 2 above average salaries.

I think the interest rate on high LTV houses is likely to be high, as it is a high risk of going in to negative equity.

Basically: how cost effective is buying if you are already stretched, and why can't you save more? Look carefully at money - short term and long term.

we put a 10% deposit down in 2018 on our first house which was £16k, we sold that house for £30k more than we bought it for 2 years later and was able to put down a much bigger deposit on our second house. What’s ridiculous is that I couldn’t afford the deposit on my own home now the way house prices have gone. Our mortgage is £700 a month which is less than the rent we were paying in 2017 when we were renting. The housing market at the moment is a shitshow if you haven’t been gifted your deposit. People often look back with rose tinted glasses wondering why first time buyers can’t get a deposit together when the reality it’s it’s virtually impossible! You have my sympathies as everyone else who has bought more than 5 years ago has been lucky to be in the right place at the right time in my opinion. You could look at help to buy? You would put 5% down and they would put the other 25% I think it is. But you have to start paying it back after 5 years so you need to save as much as you can over that time so it’s not too much of a hit. Best of luck.

We do save, I never said it was just the two of us, we have kids and childcare costs.

Would your mortgage payments be the same as your rent payments? If so you can't afford it. You need to be able to save for things that need breaking and maintaining.

I'd be cautious of ending up in negative equity at the moment but if you won't be moving for ten years and it'll be cheaper than renting then I don't see why not. You are chain free and prices are falling so negotiate hard.

It will definitely be very hard to save a lot of money if you are renting privately and already have 2 children, much easier to save before having a family.
Now is a really bad time to take out a 100% mortgage though with house prices falling and expected to fall a lot more.

You might be able to get a 100% mortgage and keep your savings in an emergency slush fund for house repairs etc, but I really wouldn't advise doing that right now.

For the majority of people, buying now will cost far more than the equivalent rent on a similar quality home, but you have the added and very real risk of negative equity a few years down the line in a falling market. That's fine if you can afford your lender's SVR, but right now, they are about 8.5%.

Unless you loathe your rental, I would advise holding off for a few years when house prices will be more reasonable and interest rates may have stabilised.

How much are the properties in your area that you would be looking to buy?