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Buying a house with a 5% deposit

Discussion in 'Home and Garden' started by MG42Maniac, Mar 6, 2018.

  1. Admiral Huddy

    Caporegime

    Joined: Feb 17, 2003

    Posts: 29,509

    Location: Chelmsford & Broadgate

    Easier said than done.. 5% is relative to the price which once was and is now. This could be worlds apart..

    OP -

    My daughter is in the same predicament- Realistically, she needs £60k for a deposit which she's not likely to get anytime soon.

    However, [as already said] the more deposit you pay the better rate you'll get. Also, you have to consider that you'll want to be paying off some of the capital as this will reduce the loans and any interest long term. It will also increase your chance at remortgaging.. You don't want to be in a position that in 5 years time, you decide you want to move but have paid nothing off.. The same can be said of 35-40 year mortgages..

    IMHO - Save hard for another year, see what the housing market does in that time.. Pay as much deposit as you can afford.. even if you have to wait longer. Opt for a term that is realistic and works for you long term. As Mr E said, "bite the bullet" .. but don't struggle for 5 years only to find there is no benefit at the end otherwise your struggling would be a waste of time.

    Have you considered the help to buy scheme?
     
  2. Firestar_3x

    Caporegime

    Joined: Mar 11, 2005

    Posts: 30,276

    Location: Leafy Cheshire

    The problem with waiting is the house he wants to buy may increase in value faster than he can save therefore putting him in an even worse position (even before considering his current rent position).

    Buying with just a 5% deposit can be a very risky thing to do and if the housing market declines you are trapped, but in your position i'd probably take that risk, just make sure you understand what you could be letting yourself in for.
     
  3. i5aces

    Hitman

    Joined: Jan 29, 2012

    Posts: 678

    Location: Andover

    With me the advisor put in all my details and Halifax came back with we will lend up to X amount but require a deposit of 15%, the house I bought was 45k under what they offered to lend me but the deposit still had to be 15% of the purchase price.
    My credit score and personal finances were the reason.
    I would imagine being self employed and not having 3 years books you could find yourself in the same position.
     
  4. Psycho Sonny

    Caporegime

    Joined: Jun 21, 2006

    Posts: 33,397

    I'd go for a cheaper property. Why?

    1. You will get much better interest rate.
    2. You will be able to save more money (have more disposable).
    3. With Brexit looming house prices are likely to stagnate or even go down.
    4. It's also been stated there is a good chance of another recession soon, stock market crash is likely this year or the next too they have been growing too much too fast.

    You say you would want to re-buy soon again and be a stepping stone. Reality being if you can only put together 5% deposit now you can't have bags of disposable income which is what you need to do so to get the big house IMO.

    Remember bigger house = bigger bills and more furniture and appliances and more to go wrong / maintenance. Bigger re-decorating bills.

    I'd go smaller and be more comfortable financially than be scraping buy just to say I've got a big house.
     
  5. Mr.E.

    Wise Guy

    Joined: Oct 18, 2002

    Posts: 1,402

    Location: middle of nowhere

    No, if he buys this house he's staying put for "years and years" He said he'd re mortgage, this house in a couple of years.
     
  6. Psycho Sonny

    Caporegime

    Joined: Jun 21, 2006

    Posts: 33,397

    i meant if he went for the cheaper home than the one he's looking at now with 5%. he says he would want to re-buy within 2-5 years.

    chances are it wouldn't be financially viable. but the bands only decrease for every 5% so he would need to somehow turn his 5% deposit into a 10% one to get into a lower interest rate band.

    also he says the house he is eyeing up is £350K. well if it's offers over it could go for £375K could he afford that comfortably?

    5% of that is like £25K he needs in the bank once he takes lawyers fees and costs into account and to still have some cash to cover costs of re-decorating and furniture.

    whereas if he looks at a house for say £250K he could push for that 10% deposit by borrowing a couple of grand from parents/friends who he could pay back quickly due to the much higher disposable he would have with half the mortgage payments.