ballin

iTrader: (1)

Just been reading Jay's topic about his RS500 and got me pondering!!!

Just starting on the property ladder with my other half, and not too sure on the best options with regards mortgage.

I need to put in say 60-70k and can raise about £20k cash.

Would it be best to put in the full £20k and then get the rest as a mortgage?
Or would I be better to put the £20k in an ISA or something and get high interest and do it that way?

I've always been told you should pay off as much as you can or you end up paying loads back in interest (obviously). Is this still the case, what would you do?

I will obviously be talking to others about this but just thought id get pre-educated

It's Czech Mate

sink as much as you can into a deposit

you'll pay far less back in the long run and get a better mortgage rate as you'll be less risk because you'll have more equity

However you may want to keep some free for a rainy day or for the stuff you need to buy when setting up home

ballin

iTrader: (1)

I forgot to say that actually, that would leave me with 2-3k spare I reckon.

cheers for the advice

Anonymous

Yep, pay the 20K in, makes perfect sense

It's Czech Mate

just get some quotes from one of those IFA's. dont have a mortgage through him, when u find what you want, go direct through the bank/building society,

But when with the IFA, get him to show you the total payback on the mortgage and the difference borrowing an extra £5k for 25 years makes

It's Czech Mate

an example, if you borrow an extra £20k on a 25 year mortgage at 5.0% for the whole term ( a reasonable approximation at todays rates )

You will pay back £40075.40 in total for that £25k

Andy_R

iTrader: (3)

All depends on what your thoughts are towards Investment and particulary risk/reward.

If you are prepaired to accept an element of risk and invest in a Stocks/Shares based ISA in the hope of a higher return as opposed to an Interest bearing ISA, then it may well be worth thinking about. Using a proportion of your £20k for deposit and investing the rest.

Otherwise you would need an Interest bearing ISA or ISA's (you & your other half) that provides a better rate of interest than that of your mortgage rate. Balancing one off against the other.
Not really going to be majorly beneficial other than having funds available should you need them at a later date.

hth

ballin

iTrader: (1)

Thanks for that Andy, to be honest it sounds a little risky for ultimately not a lot of gain (except security).

Matt, that puts it in perspective cheers bud.
Definately makes me think get as small a mortgage as possible and plough as much cash in as I can afford to? (general idea anyway!)

dojj

iTrader: (3)

pump in as much cash as you can to get the smallest mortgage is what i'd say
find out the difference in replayments between one and the other per month, then work it out over 25 years, it'll be a lot of money

ballin

iTrader: (1)

its a depressing amount!!!

is a 25year mortgage the norm then? I guess you just go for the shortest term you can afford

COMEDY DAN

Put in as much as you can from the start as a deposit.

It will work wonders in your favour and the system will pull out a much more favourable interest rate, as you will be paying less back over the period.

If you are a first time buyer, this will affect your interest rate too, ie. you should get companies offering you a lower interest rate and optional payment plans.

£20k is a nice sum to put in, and dont forget, whatever you put in, remains yours, so you are not losing it, simply investing it into your own property, creating instant equity.

ballin

iTrader: (1)

ah right yeah i didnt think of it like that, and then i assume pay it all back as quickly as possible?

IE. if you can afford a 10year mortgage better to do that than a 20year

COMEDY DAN

You have hit the nail on the head.

ballin

iTrader: (1)

cool cheers dan

fordsportjay

iTrader: (6)

defo put as much in as depo on a repayment mortgage.

COMEDY DAN

Defo.

Andy_R

iTrader: (3)

20% deposit will easily see you with sufficient deposit to give you a wide range of mortgage products at very competative rates.

On a £70k purchase assuming that valuation comes upto £70k then this would require £14k deposit.

You could easily see 10%+ growth on the ballance if your prepaired to look at investing in Unit/Investment Trusts.

In many cases more is not best when it comes to deposits for house purchase.
In my experience it pays to think of the bigger picture and explore other avenues as to how your money can work for you, rather than sitting dead tied up in your propery.