House purchase - 10% deposit versus 20% and other factors

[garnet]

I discussed the directors loan option with the accountant, and given that I have no other sources of income, it just seemed to be kicking the tax can down the road somewhat...

How so? My accountant confirmed this is the cheapest option to borrow money.
Ask yours to prove what can go wrong.
BTW if you ask the bank to give you a breakdown on how much interest you pay in each of your repayments every month you will see. It is around 33%.
Every £ you can put into deposit will save you a lot.

[rambaugh]

You are kidding right. Just because you didn't take it out of the bank you don't pay tax on it? Honestly???

Are you sure you should be messing about with loans?

This is quite a narrow point of view. Director's loans are a good avenue of financing short term personal debt. If you ample retained earnings as cash reserves in your limited company AND also have buffers such as personal investments that you can liquidated when needed to repay a directors loan then it becomes a good financing strategy. The benefit of this is your company earns interest on the loan that would otherwise have gone to the bank.

[northernladuk]

This is quite a narrow point of view. Director's loans are a good avenue of financing short term personal debt. If you ample retained earnings as cash reserves in your limited company AND also have buffers such as personal investments that you can liquidated when needed to repay a directors loan then it becomes a good financing strategy. The benefit of this is your company earns interest on the loan that would otherwise have gone to the bank.

I think you missed the point of my post. I'm all up for DL's. I used them myself when I had an Offset Mortgage. The point was my incredulity at Garnets misunderstanding of how the basics of his accounting works.

[PurpleGorilla]

Thanks for sharing this - very interesting.

[WTFH]

House purchase - 10% deposit versus 20% and other factors

BTW if you ask the bank to give you a breakdown on how much interest you pay in each of your repayments every month you will see. It is around 33%.

I think you might want to check your figures. Typically in the first year around half the repayment goes to interest. It only gets to 33% after 8+ years

[ChimpMaster]

I think you might want to check your figures. Typically in the first year over half the repayment goes to interest. It only gets to 33% after about 10 years

So how do you reduce this? Overpay each month?

[WTFH]

House purchase - 10% deposit versus 20% and other factors

Yup, get an offset mortgage or make overpayments.

Just looking at my own figures (the mortgage loan was similar to the OP)
£30k in an offset pot in the first 5 years will reduce the interest paid by close to £20k AND reduce the repayment time by 2 years.

[WTFH]

Take a look here for more info on what overpayments/offsets can do...

http://www.moneysavingexpert.com/mor...ate-calculator

[garnet]

I think you might want to check your figures. Typically in the first year around half the repayment goes to interest. It only gets to 33% after 8+ years

Not in my one. It was even 33%

[WTFH]

Not in my one. It was even 33%

So your mortgage isn't a repayment mortgage of £300k+ with an interest rate of 2.3%+ over 20-25 years with a 10-20% deposit.

What were the figures for yours when you took it out?