Trapped in a bit of a quandary at the moment. Currently going through a house purchase and deciding between 10% and 20% deposit. Lender is Halifax.
House is £380,000
10% deposit:
Have enough cash at hand to pay without taking much additional dividend
2.54% interest on payments
£1541 a month
£462,350 repayable
20% deposit
Will need to take about £50k dividend resulting in £9500 income tax
2.34% interest on payments
£1339 a month
£401,828 repayable
Has anyone come up against this before and what did you do? On the face of it, the 20% seems to be (in the short term) a worse way of doing things, because of the £9500 dividend tax. However, as this is London and everything is accelerating in price, is it better to take the hit and have 20% of the equity as its value increases? I suppose the real question is "can we expect the 20%, with tax included, to outperform 10% with no tax to pay"... maybe)
Is there a stand-out best option here or are they both about equal? Would be interested to hear views of others and what they did in this situation.
House is £380,000
10% deposit:
Have enough cash at hand to pay without taking much additional dividend
2.54% interest on payments
£1541 a month
£462,350 repayable
20% deposit
Will need to take about £50k dividend resulting in £9500 income tax
2.34% interest on payments
£1339 a month
£401,828 repayable
Has anyone come up against this before and what did you do? On the face of it, the 20% seems to be (in the short term) a worse way of doing things, because of the £9500 dividend tax. However, as this is London and everything is accelerating in price, is it better to take the hit and have 20% of the equity as its value increases? I suppose the real question is "can we expect the 20%, with tax included, to outperform 10% with no tax to pay"... maybe)
Is there a stand-out best option here or are they both about equal? Would be interested to hear views of others and what they did in this situation.
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