Taking out a 95% loan-to-value mortgage rather than 85% LTV costs £190 extra per month when taking into consideration the cost of a typical first-time buyer home in England and Wales (£162,000), which would cut a single buyer’s available income by 36%.
Buying a house with a 5% loan rather than 15% costs £57,000 more over the term of the loan for first-time buyers, Hamptons International Research’s Ability to Buy study has estimated.
Taking out a 95% loan-to-value mortgage rather than 85% LTV costs £190 extra per month based on the cost of a typical first-time buyer home in England and Wales (£162,000), which would cut a single buyer’s available income by 36%.
Fionnuala Earley, director of residential research at Hamptons International, said: “Many will see the smaller deposit requirement as the quickest route to homeownership.
“However, there is no such thing as a free lunch and the trade-off is in paying for the finance. Choosing the low deposit route means higher mortgage payments, which cuts into disposable income.
“There is certainly a trade-off that buyers need to think carefully about – especially in the face of changing house prices. Is the short-term time gain worth the longer term financing cost?”
Despite the added cost single first-time buyers can save for a 5% deposit eight years faster than a 15% deposit, while couples can save two years faster.
In London it would take a single first-time buyer 34 years longer to save for a 15% deposit compared to a 5%, while it would take couples seven years longer.
