One of the major expenses when buying a home is the deposit. The deposit is the upfront sum you contribute towards the purchase price and is usually a percentage of the total cost.
How much deposit do you need?
The required deposit amount varies based on factors like the property’s price and the type of mortgage you select. Generally, lenders require a minimum deposit of 5-10%, but some may require a larger amount.
Higher deposits: enhanced options and reduced risk
If you can make a larger deposit, such as 10-20%, you’ll gain some significant advantages. Lenders tend to view larger deposits more favourably, potentially allowing you to qualify for lower interest rates and more favourable mortgage terms. This can lead to substantial savings on interest payments over the course of your mortgage.
While 95% mortgages are widely available, several factors can influence the minimum deposit a lender may require. Your credit score and employment history are key in determining your creditworthiness, which lenders assess to gauge your ability to repay the loan.
Saving for your deposit
While saving for a deposit can be daunting, it’s achievable with careful planning and the right tools. Start by creating a budget, reducing non-essential spending, and exploring government-backed options like the Lifetime ISA to help you reach your savings target.
Gifted deposits
A gifted deposit occurs when someone, often a family member, provides you with funds to help with your deposit. If you’re using a gifted deposit, you’ll need to provide proof to your lender of the source of the funds and sign a declaration confirming it is not a loan.
The value of mortgage advice
Navigating mortgage deposits can be challenging, especially if you’re new to the process. We highly recommend speaking to a mortgage adviser who will carefully evaluate your financial situation, offer tailored advice, and guide you toward the right mortgage option for your needs.
If you’re uncertain whether your deposit is sufficient for a mortgage or unsure about the deposit amount required, don’t hesitate to contact us today!
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.
The fee is up to 1% but a typical fee is £598.
