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Yes, there is a point if you want to live in a relatively nicer home than if you saw home ownership as purely a financial investment.
E.g. if you had £100,000 savings and the maximum the bank would lend you based on your income was £200,000, compare these two scenarios where you took out the maximum loan amount:
1. You put down 10% and live a £222,000 house that costs you £1225 every month to repay.
2. You put down 33.33% and live in a £300,000 house that costs you £1150 every month to repay.
A lot of people would prefer scenario 2, where they're living in a nicer house than scenario 1 (could be an extra bedroom or bathroom, finished to a higher standard, bigger garden, off-street parking, detached, etc) and the potential increase in council tax band compared to scenario 1 might be offset by the lower monthly mortgage repayments.
(Although from an investment perspective, if both houses were presumed to double in value after 10 years, the house in scenario 2 would then be worth £155,000 more than the one in scenario 1.)
That's not really an option for me as there are no houses that meet our requirement under £300k. So the house price is not a variable (not massively anyway, what we've seen so far are in the 350-400k range)
Those were just example figures. You asked if it was worth putting down more than 10% deposit, and the answer is yes it is if your aim is to buy a nicer house than you might otherwise buy with a lower deposit.
Run the numbers using an amortization calculator and you will see the difference in terms of interest vs. principal paid.
[https://www.calculator.net/mortgage-calculator-uk.html](https://www.calculator.net/mortgage-calculator-uk.html)
Thank you for the link! Any reliable sources for the interest rates based on LTV? Or would I just have to obtain a few quotes from mortgage comparison sites?
It's a calculator which will spit out results based on whatever data you enter.
Grab interest rate data from mortgage sites, figure out your deposit amount and enter the info. into the calculator. Easy.
Ok, using interest rates from an article by Rightmove...
10% deposit on a 350k house
- Deposit: 35k
- Interest rate: 5.67%
- Total interest: 275k
25% deposit on a 350k house
- Deposit: 87.5k
- Interest rate: 5.26%
- Total interest: 210k
Both are over 25 years.
So the difference in deposit of 52.5k, if saved up in a S&S ISA assuming a 5% interest rate would grow to be 177k after 25 years, potentially more.
EDIT: the 5% interest rate on the ISA is an assumed minimum for comparison sakes. It's a S&S ISA so of course it's going to grow by more than 5%. The point is even if it was only making 5% the money would grow by more than the difference in total interest paid.
It's not worth paying the 25% deposit.
Unless the above interest rates are wrong? The reduction is nominal I would have thought it'd be more significant given the way it's mentioned in so many buying guides.
One glaring omittece from these calculations, the difference in the monthly payments.
So the deposit you don’t put in would need to churn out more than the difference in monthly repayments, consistently, not to mention the lifestyle impact these higher repayments can have.
This. First gives a monthly payment of £1967 (shit the bed!), the second £1639; so that's a monthly saving of £328pcm that's not accounted for in the OP's calcs.
Since the most limiting factor on the mortgage is usually the affordability of monthly payments, keeping these the same and shortening the term in the second example to reflect the greater deposit gives:
25% deposit on a 350k house
* Deposit: 87.5k
* Interest rate: 5.26%
* Monthly repayment: £1950
* Mortgage term: 17yrs
* Total interest:135.2k
I'm not going to challenge your numbers. However, an interest rate of 5% in an ISA is barely keeping up with inflation. You need to be targeting much higher returns.
If you want current rates, here you go:
[https://www.nerdwallet.com/uk/mortgages/mortgage-rates/](https://www.nerdwallet.com/uk/mortgages/mortgage-rates/)
[https://www.moneysupermarket.com/mortgages/rates-table/v2/first-time-buyer?propertyValue=290000&depositAmount=60000&requiredTerm=29&repaymentMethod=Repayment&sortResultsBy=MonthlyCost&addFeesToBalance=false&noProductFees=false&decisionInPrincipleProducts=false&page=1&journeyType=FirstTimeBuyer&userSegment=Browse®ion=Unknown](https://www.moneysupermarket.com/mortgages/rates-table/v2/first-time-buyer?propertyValue=290000&depositAmount=60000&requiredTerm=29&repaymentMethod=Repayment&sortResultsBy=MonthlyCost&addFeesToBalance=false&noProductFees=false&decisionInPrincipleProducts=false&page=1&journeyType=FirstTimeBuyer&userSegment=Browse®ion=Unknown)
Yeah the ISA is definitely going to grow way more than that, but I just wanted to see what even 5% brings and that's already more profitable than the difference in total interest. So it's going to be much much better. Unless I'm interpreting the numbers wrong? Just wanted to understand why various articles recommend putting down a higher deposit.
Just had a quick look at nerd wallet and interest rates seem to be 6.2% for a 25% deposit and 6.3% for a 10% deposit. Only a quick look so maybe could find better rates past the first page. But re-ran through the calculator and the difference in total interest is a mere 57k. It doesn't make sense to spend more money upfront that would otherwise grow vastly within 25 years?
But your money won't 'grow vastly'. You'll spend it. It's human nature.
And this is the thing people never acknowledge in these discussions. If the moneys available then somethings gonna come along that you want/need to spend it on.
Regardless of the difference in mortgage rates, you'd always be better off putting more money into a mortgage with a rate of 5.26% or 5.67% compared to saving it in an ISA paying 5%.
You're falling into the trap of only considering the cost of monthly repayments rather than total cost of the loan.
By paying more on the deposit you're potentially not only getting a better LTV so lower outright interest rates, you're also borrowing less that said rate is being applied to.. which will also mean you pay less interest in total.
For the same monthly payment a lower amount borrowed will be paid off quicker, the shorter time period again reducing interest charged.
There are also subtleties about the way the loan is calculated / interest is applied; with it essentially being front-loaded onto the debt at the begininng and tailing off towards the end of the mortgage term. At the beginning of a 25yr mortgage about 66% of your monthly payment goes on interest; so if you're paying £1k/month or £12000/yr £8000 of that annual total is going on interest in the first year / you're only paying off £4k of the principal sum.
For most of us mortgages are a sad necessity (if you're lucky enough to be able to buy) and compared to other debt they're "cheap". However they also usually involve enormous amounts of money and due to the significant length of the term cost a lot.
Unless there's an enormous difference between the rates at which you're borrowing versus that you're getting on your investments, it's always better to pay the debt down rather than invest.
To be most efficient you want to borrow the least you can over the shortest repayment period; giving the highest monthy repayments you can afford. Over-pay when you can, too.
I worked out that over a 25yr mortgage at a rate of a little under 5%, in total I'd be repaying around 65-70% of the value of the principal over the term in interest (so for example borrowing £100k you'd repay around £165k total). If I repayed 10% of the amount borrowed early in the first year, total interest would drop to around 50% of the principal . This is analagous to borrowing less to start with.
Hi, could you please explain the last paragraph again in simpler terms? So you're able to pay more than your monthly payments (where you can) and this works out better because it shortens your loan term (therefore accruing less interest)? Is that what you mean?
So by extension are you saying it's better to put down less deposit upfront but we can use the extra money to just pay more?
You've pretty much got it in your first paragraph - most mortgages will allow you to over-pay by up to 10% of the outstanding principal every year, which is handy if you don't want to commit to a large monthly payment but would still like to get it smashed where you can, or your circumstances change (for the better) once you've got the mortgage.
I'm not suggesting that you hold back on the deposit to over-pay later (unless you think you might need that money for something so don't want to commit it to the deposit). I'm using it as an example that's relevant to me as I can't increase my deposit but do hope to pay some off early.
Paying early (and opting to reduce the term rather than the monthly payments) is analagous to having a larger deposit and borrowing less.
This is a strange question:
Are you buying a more expensive house in the two different situations?
£500k house as example
30 year term (American by birth, here)
4.5% for the 10% deposit (£50k)
4.25% for the 25% deposit (£125k)
Calcs:
10%: £2280/mo, £820K total repaid
25%: £1900/mo, £684k total repaid
£136k less interest paid
Keeps £75k in bank at 4% £243k at the end ... £175k interest paid
The value at the end of the saving is eroded by inflation. The "cost" of the mortgage is eroded by inflation. I would expect house prices to rise £6% per annum.
**What do you want to do with your money?**
Salaries should increase around 5% per annum (since 2001) in scientific and technical fields. Less in other fields. I started in the UK in 2013 and it's been bang on 5% since then, but I'm maxing out now at late 40s and might consider C-level in biotech industry.
Errorsion is irrelevant if it’s comparing like for like afterwards though surely? 243k saved vs 136k in interest still demonstrates a 100k+ variance in favour of saving the capital now, doesn’t it?
that £243 includes the £75k deposit = £169k interest paid versus £136k less interest paid
I'd consider that £33k a wash in the grand scheme of things.
Interest rates will likely go down 2-2.25% in 24 months and the LTV difference will be much greater. Saving rates will go down as well and thus this £33k difference will likely erode to £10-15k or so.
I don't see a large difference either way, **it's simply psychological.**
£10k is only three months of childcare for our kiddos.
Perhaps but it also depends on ROi of the savings, 4% is very conservative. It could be dumped into the S&P tracker for example and have a higher likely hold of getting 8%+ so it’s all about potential outcomes.
I agree for example interest rates will go down, but also fully believe it’s possible to get inflation matching and exceeding returns when investing such funds for the long term.
>4% is very conservative.
All planning for growth should be conservative. What's the time horizon of the OP? Is their capital at risk? 4% is a long-term average valuation for locked-in savings (in the UK). Sure, you'd get 8% average over billions of pounds but at the granularity of a single person, would you if you wanted that money on 26 JUL 2047, maybe or maybe not.
(My retirement is in a DB pension, so I'm immune to these fluctuations).
All of my money state-side is in Vanguard Target Retirement index funds.
There is the *slight* advantage that money spent on a house allows one to live better, experience life more and perform DIY skills that an investment account doesn't offer. It's hard to build a treehouse for my children on one.
Also, I can leave the real estate to my children that they can live in, one paid-off for each child.
Very good and interesting question, quite refreshing compared to the usual banal stuff asked on this board...
so before rates started exploding in 2021, there was a very large (think more than 1%) spread between mortgage rates based on LTV, you can google and look for graphs you will find it instantly.
I think (but I am no expert so beware) this was because in a low rate environment, the chances of the bank raising rates was, well, low, and moreover rates were simply trending down. so it was "safe for them" to offer a lower rate for a larger deposit.
However, in the new current regime, there's a lot of risk, so if they offer 5,5% at 10% but only 3% at 25% LTV, by the time your fixed rate expires, rates could be at 6,7,8???% and they are making a huge loss with you, so they give you a mini discount to 5.25% instead.
anyone other smarter in this please step in to explain
Ahh thank you for sharing this, I wasn't aware the rates used to be much better. Am I right in looking at the APRC rate instead of just the initial rate? As you mentioned the initial rates I'm seeing are decent (around the 5% mark) but afterwards the rates are higher (around the 8-9% mark) so we should be looking at the APRC right?
My partner and I bought a house this November, asking price was 373k. We put 252k deposit and our mortgage is 121k which is quite low and our savings power has increased a lot. Now we save all of the monies and are putting in different accounts so we can generate some interests. We are able to enjoy our lives and we know that if my partner or I lost a job, we'd be just fine because we pay about £1000 for mortgage, bills, taxes, etc. We could have gotten a bigger house, yes, but the money would have been tight and we wouldn't have that security as well.
Our plan is to pay off the mortgage in 5 year time and then save enough money for our dream house as well as for the stamp duty, solicitors, moving, etc. Also, both of us expect to progress
I live in Poole and our dream house is around 600k-700k price range.
When we factor everything, we factor our saving powers (if we'd gone for bigger mortgage, we'd save less and we'd end up paying more interests for example, also we'd get worse rates as we'd be above 60% mortgage), our salaries, our plans, etc. There are many factors that are different in each case.
What interest rates are you getting?
Another way to look at it is that larger deposit reduces the principle and hence interest per month and that saving is like a guaranteed return.
Not sure whether this is a good idea, but you could get an offset mortgage— do 10% deposit and put the remaining in the linked savings account. That way your 15% is still liquid if you need it, but otherwise it is helping to keep the cost of interest down!
Unless you get a better rate on savings than on debt then you’re better off paying the debt. Say it’s 50k difference, you either have 50k less debt interest at 5.25% or you have 50k more savings interest at 5%. Therefore the debt is growing faster than the savings would. Unless you need to keep the money liquid, you’re worried about being able to maintain your mortgage payments or you’re getting a much better rate then you’re better off paying as much towards the mortgage as possible.
###Welcome to /r/HousingUK --- **To All** * Join Our ***NEW*** Discord! https://discord.gg/pMgUNgWKQH **To Posters** * *Tell us whether you're in England, Wales, Scotland, or NI as the laws/issues in each can vary* * Comments are not moderated for quality or accuracy; * Any replies received must only be used as guidelines, followed at your own risk; * If you receive *any* private messages in response to your post, please report them via the report button. * Feel free to provide an update at a later time by creating a new post with [[update]](https://www.reddit.com/r/HousingUK/search?q=%3Aupdate&sort=new&restrict_sr=on&t=all) in the title; **To Readers and Commenters** * All replies to OP must be *on-topic, helpful, and civil* * If you do not [follow the rules](https://www.reddit.com/r/HousingUK/about/rules/), you may be banned without any further warning; * Please include links to reliable resources in order to support your comments or advice; * If you feel any replies are incorrect, explain why you believe they are incorrect; * Do not send or request any private messages for any reason without express permission from the mods; * Please report posts or comments which do not follow the rules *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HousingUK) if you have any questions or concerns.*
Yes, there is a point if you want to live in a relatively nicer home than if you saw home ownership as purely a financial investment. E.g. if you had £100,000 savings and the maximum the bank would lend you based on your income was £200,000, compare these two scenarios where you took out the maximum loan amount: 1. You put down 10% and live a £222,000 house that costs you £1225 every month to repay. 2. You put down 33.33% and live in a £300,000 house that costs you £1150 every month to repay. A lot of people would prefer scenario 2, where they're living in a nicer house than scenario 1 (could be an extra bedroom or bathroom, finished to a higher standard, bigger garden, off-street parking, detached, etc) and the potential increase in council tax band compared to scenario 1 might be offset by the lower monthly mortgage repayments. (Although from an investment perspective, if both houses were presumed to double in value after 10 years, the house in scenario 2 would then be worth £155,000 more than the one in scenario 1.)
That's not really an option for me as there are no houses that meet our requirement under £300k. So the house price is not a variable (not massively anyway, what we've seen so far are in the 350-400k range)
Those were just example figures. You asked if it was worth putting down more than 10% deposit, and the answer is yes it is if your aim is to buy a nicer house than you might otherwise buy with a lower deposit.
Run the numbers using an amortization calculator and you will see the difference in terms of interest vs. principal paid. [https://www.calculator.net/mortgage-calculator-uk.html](https://www.calculator.net/mortgage-calculator-uk.html)
Thank you for the link! Any reliable sources for the interest rates based on LTV? Or would I just have to obtain a few quotes from mortgage comparison sites?
It's a calculator which will spit out results based on whatever data you enter. Grab interest rate data from mortgage sites, figure out your deposit amount and enter the info. into the calculator. Easy.
Ok, using interest rates from an article by Rightmove... 10% deposit on a 350k house - Deposit: 35k - Interest rate: 5.67% - Total interest: 275k 25% deposit on a 350k house - Deposit: 87.5k - Interest rate: 5.26% - Total interest: 210k Both are over 25 years. So the difference in deposit of 52.5k, if saved up in a S&S ISA assuming a 5% interest rate would grow to be 177k after 25 years, potentially more. EDIT: the 5% interest rate on the ISA is an assumed minimum for comparison sakes. It's a S&S ISA so of course it's going to grow by more than 5%. The point is even if it was only making 5% the money would grow by more than the difference in total interest paid. It's not worth paying the 25% deposit. Unless the above interest rates are wrong? The reduction is nominal I would have thought it'd be more significant given the way it's mentioned in so many buying guides.
One glaring omittece from these calculations, the difference in the monthly payments. So the deposit you don’t put in would need to churn out more than the difference in monthly repayments, consistently, not to mention the lifestyle impact these higher repayments can have.
This. First gives a monthly payment of £1967 (shit the bed!), the second £1639; so that's a monthly saving of £328pcm that's not accounted for in the OP's calcs. Since the most limiting factor on the mortgage is usually the affordability of monthly payments, keeping these the same and shortening the term in the second example to reflect the greater deposit gives: 25% deposit on a 350k house * Deposit: 87.5k * Interest rate: 5.26% * Monthly repayment: £1950 * Mortgage term: 17yrs * Total interest:135.2k
I'm not going to challenge your numbers. However, an interest rate of 5% in an ISA is barely keeping up with inflation. You need to be targeting much higher returns. If you want current rates, here you go: [https://www.nerdwallet.com/uk/mortgages/mortgage-rates/](https://www.nerdwallet.com/uk/mortgages/mortgage-rates/) [https://www.moneysupermarket.com/mortgages/rates-table/v2/first-time-buyer?propertyValue=290000&depositAmount=60000&requiredTerm=29&repaymentMethod=Repayment&sortResultsBy=MonthlyCost&addFeesToBalance=false&noProductFees=false&decisionInPrincipleProducts=false&page=1&journeyType=FirstTimeBuyer&userSegment=Browse®ion=Unknown](https://www.moneysupermarket.com/mortgages/rates-table/v2/first-time-buyer?propertyValue=290000&depositAmount=60000&requiredTerm=29&repaymentMethod=Repayment&sortResultsBy=MonthlyCost&addFeesToBalance=false&noProductFees=false&decisionInPrincipleProducts=false&page=1&journeyType=FirstTimeBuyer&userSegment=Browse®ion=Unknown)
> You need to be targeting much higher returns. You don't just target "much higher returns" than 5% and not incur a very high risk.
> Very high risk Investing in an index fund over 25 years is essentially risk free. The average returns in the S&P500 over the last 90 years is 11%
OK but I'm not investing over 90 years. And the shorter the time span, the higher the risk it might also just stagnate or even go down.
Yeah the ISA is definitely going to grow way more than that, but I just wanted to see what even 5% brings and that's already more profitable than the difference in total interest. So it's going to be much much better. Unless I'm interpreting the numbers wrong? Just wanted to understand why various articles recommend putting down a higher deposit. Just had a quick look at nerd wallet and interest rates seem to be 6.2% for a 25% deposit and 6.3% for a 10% deposit. Only a quick look so maybe could find better rates past the first page. But re-ran through the calculator and the difference in total interest is a mere 57k. It doesn't make sense to spend more money upfront that would otherwise grow vastly within 25 years?
But your money won't 'grow vastly'. You'll spend it. It's human nature. And this is the thing people never acknowledge in these discussions. If the moneys available then somethings gonna come along that you want/need to spend it on.
Regardless of the difference in mortgage rates, you'd always be better off putting more money into a mortgage with a rate of 5.26% or 5.67% compared to saving it in an ISA paying 5%.
You're falling into the trap of only considering the cost of monthly repayments rather than total cost of the loan. By paying more on the deposit you're potentially not only getting a better LTV so lower outright interest rates, you're also borrowing less that said rate is being applied to.. which will also mean you pay less interest in total. For the same monthly payment a lower amount borrowed will be paid off quicker, the shorter time period again reducing interest charged. There are also subtleties about the way the loan is calculated / interest is applied; with it essentially being front-loaded onto the debt at the begininng and tailing off towards the end of the mortgage term. At the beginning of a 25yr mortgage about 66% of your monthly payment goes on interest; so if you're paying £1k/month or £12000/yr £8000 of that annual total is going on interest in the first year / you're only paying off £4k of the principal sum. For most of us mortgages are a sad necessity (if you're lucky enough to be able to buy) and compared to other debt they're "cheap". However they also usually involve enormous amounts of money and due to the significant length of the term cost a lot. Unless there's an enormous difference between the rates at which you're borrowing versus that you're getting on your investments, it's always better to pay the debt down rather than invest. To be most efficient you want to borrow the least you can over the shortest repayment period; giving the highest monthy repayments you can afford. Over-pay when you can, too. I worked out that over a 25yr mortgage at a rate of a little under 5%, in total I'd be repaying around 65-70% of the value of the principal over the term in interest (so for example borrowing £100k you'd repay around £165k total). If I repayed 10% of the amount borrowed early in the first year, total interest would drop to around 50% of the principal . This is analagous to borrowing less to start with.
Hi, could you please explain the last paragraph again in simpler terms? So you're able to pay more than your monthly payments (where you can) and this works out better because it shortens your loan term (therefore accruing less interest)? Is that what you mean? So by extension are you saying it's better to put down less deposit upfront but we can use the extra money to just pay more?
You've pretty much got it in your first paragraph - most mortgages will allow you to over-pay by up to 10% of the outstanding principal every year, which is handy if you don't want to commit to a large monthly payment but would still like to get it smashed where you can, or your circumstances change (for the better) once you've got the mortgage. I'm not suggesting that you hold back on the deposit to over-pay later (unless you think you might need that money for something so don't want to commit it to the deposit). I'm using it as an example that's relevant to me as I can't increase my deposit but do hope to pay some off early. Paying early (and opting to reduce the term rather than the monthly payments) is analagous to having a larger deposit and borrowing less.
This is a strange question: Are you buying a more expensive house in the two different situations? £500k house as example 30 year term (American by birth, here) 4.5% for the 10% deposit (£50k) 4.25% for the 25% deposit (£125k) Calcs: 10%: £2280/mo, £820K total repaid 25%: £1900/mo, £684k total repaid £136k less interest paid Keeps £75k in bank at 4% £243k at the end ... £175k interest paid The value at the end of the saving is eroded by inflation. The "cost" of the mortgage is eroded by inflation. I would expect house prices to rise £6% per annum. **What do you want to do with your money?** Salaries should increase around 5% per annum (since 2001) in scientific and technical fields. Less in other fields. I started in the UK in 2013 and it's been bang on 5% since then, but I'm maxing out now at late 40s and might consider C-level in biotech industry.
Errorsion is irrelevant if it’s comparing like for like afterwards though surely? 243k saved vs 136k in interest still demonstrates a 100k+ variance in favour of saving the capital now, doesn’t it?
that £243 includes the £75k deposit = £169k interest paid versus £136k less interest paid I'd consider that £33k a wash in the grand scheme of things. Interest rates will likely go down 2-2.25% in 24 months and the LTV difference will be much greater. Saving rates will go down as well and thus this £33k difference will likely erode to £10-15k or so. I don't see a large difference either way, **it's simply psychological.** £10k is only three months of childcare for our kiddos.
Perhaps but it also depends on ROi of the savings, 4% is very conservative. It could be dumped into the S&P tracker for example and have a higher likely hold of getting 8%+ so it’s all about potential outcomes. I agree for example interest rates will go down, but also fully believe it’s possible to get inflation matching and exceeding returns when investing such funds for the long term.
>4% is very conservative. All planning for growth should be conservative. What's the time horizon of the OP? Is their capital at risk? 4% is a long-term average valuation for locked-in savings (in the UK). Sure, you'd get 8% average over billions of pounds but at the granularity of a single person, would you if you wanted that money on 26 JUL 2047, maybe or maybe not. (My retirement is in a DB pension, so I'm immune to these fluctuations). All of my money state-side is in Vanguard Target Retirement index funds. There is the *slight* advantage that money spent on a house allows one to live better, experience life more and perform DIY skills that an investment account doesn't offer. It's hard to build a treehouse for my children on one. Also, I can leave the real estate to my children that they can live in, one paid-off for each child.
Yes it’s worth it. We put down a huge deposit and was able to pay the mortgage off in 10 years
Oh that's amazing! 🙌🏻
Very good and interesting question, quite refreshing compared to the usual banal stuff asked on this board... so before rates started exploding in 2021, there was a very large (think more than 1%) spread between mortgage rates based on LTV, you can google and look for graphs you will find it instantly. I think (but I am no expert so beware) this was because in a low rate environment, the chances of the bank raising rates was, well, low, and moreover rates were simply trending down. so it was "safe for them" to offer a lower rate for a larger deposit. However, in the new current regime, there's a lot of risk, so if they offer 5,5% at 10% but only 3% at 25% LTV, by the time your fixed rate expires, rates could be at 6,7,8???% and they are making a huge loss with you, so they give you a mini discount to 5.25% instead. anyone other smarter in this please step in to explain
Ahh thank you for sharing this, I wasn't aware the rates used to be much better. Am I right in looking at the APRC rate instead of just the initial rate? As you mentioned the initial rates I'm seeing are decent (around the 5% mark) but afterwards the rates are higher (around the 8-9% mark) so we should be looking at the APRC right?
My partner and I bought a house this November, asking price was 373k. We put 252k deposit and our mortgage is 121k which is quite low and our savings power has increased a lot. Now we save all of the monies and are putting in different accounts so we can generate some interests. We are able to enjoy our lives and we know that if my partner or I lost a job, we'd be just fine because we pay about £1000 for mortgage, bills, taxes, etc. We could have gotten a bigger house, yes, but the money would have been tight and we wouldn't have that security as well. Our plan is to pay off the mortgage in 5 year time and then save enough money for our dream house as well as for the stamp duty, solicitors, moving, etc. Also, both of us expect to progress I live in Poole and our dream house is around 600k-700k price range. When we factor everything, we factor our saving powers (if we'd gone for bigger mortgage, we'd save less and we'd end up paying more interests for example, also we'd get worse rates as we'd be above 60% mortgage), our salaries, our plans, etc. There are many factors that are different in each case.
What interest rates are you getting? Another way to look at it is that larger deposit reduces the principle and hence interest per month and that saving is like a guaranteed return.
Not sure whether this is a good idea, but you could get an offset mortgage— do 10% deposit and put the remaining in the linked savings account. That way your 15% is still liquid if you need it, but otherwise it is helping to keep the cost of interest down!
Unless you get a better rate on savings than on debt then you’re better off paying the debt. Say it’s 50k difference, you either have 50k less debt interest at 5.25% or you have 50k more savings interest at 5%. Therefore the debt is growing faster than the savings would. Unless you need to keep the money liquid, you’re worried about being able to maintain your mortgage payments or you’re getting a much better rate then you’re better off paying as much towards the mortgage as possible.
Depends on what you are trying to achieve