Quite simply, the more money you can save up, the better.

Your mortgage deposit will generally need to be for at least 5% of the value of the property you are buying. For example, if you wish to buy a home cost £150,000, you will need to have a minimum deposit of £7,500 saved.

However, you should aim to have more than 5% saved, as the bigger deposit you can build up, the greater the choice of mortgage options. You will also benefit from lower mortgage rates with a larger deposit.

Lenders view homebuyers with greater mortgage deposits as a lower risk than those who only have a small amount to put down; if you can afford to save up to 10%, 15% or 20%, you’ll find you have access to more mortgages and better rates.

Lenders best deals are usually reserved for people with either a 35% or 40% deposit, or the equivalent of equity if they are an existing homeowner who wishes to remortgage.

Can I obtain a mortgage without a deposit?

Following the global financial crisis of 2008, lenders have been more cautious, so it is unlikely you will find a zero-deposit mortgage. The lowest deposit mortgages are usually 95% deals which require a deposit of 5%. Some lenders do offer mortgages up to 100%, but only if parents or family members can provide additional cash or equity as a means of security.

Will I be able to have a mortgage with a gifted deposit?

Many first-time buyers rely on a gifted deposit from their parents. If you choose to buy a home using a gifted deposit the lender may require confirmation that the person gifting the money is aware that they will not have any claim to the property, and that they do not expect their money back.

Although lenders are typically accepting of gifted deposits from family, they may be more reluctant to lend if the gift has come from a friend.

How much deposit do I need for a Help to Buy mortgage?

If you are buying a new build property through the government’s Help to Buy equity loan scheme, you will need to put down a deposit of 5%. The government will lend you a further 20% of the property price interest-free for the first five years, so you will only need a mortgage for the 75% of the buying price.

What is the minimum deposit for a Buy to Let mortgage?

If you intend to purchase a property for the purpose of letting, you will need to save a bigger deposit than if you were buying the property to live in. You will usually need a Buy to Let mortgage deposit of at least 25% of the value of the property, and as with residential mortgages, the larger the deposit you can afford to put down, the more mortgage deals that are available.

Is it better to put a bigger deposit down on a property?

The larger the amount you can put down as a deposit, the greater the choice of mortgage. A bigger deposit will make things easier in terms of affordability, as it will mean smaller monthly mortgage payments.

Lenders typically work out how big a mortgage they are prepared to offer you based on a multiple of your income as they need to be certain you will be able to keep up with your monthly mortgage payments. They will consider your outgoings and any other debts you may have.

For example, if you earn £25,000 a year, they may agree to lend you three or four times your income, so from around £75,000 up to £100,000. If you wish to buy a property costing £125,000, you need to save a deposit of at least £25,000 to be in with a chance of securing it.

If you are unable to afford to save more than 5% of the property value, however, do not despair. There are several lenders who are willing to offer 95% mortgages, so there should still be options available to you. Seek mortgage advice if you are unsure which deal is likely to be right for you.

What is the best way to save for a deposit?

Despite interest rates plummeting in recent years and the subsequent difficulty in saving for a deposit, there are, however, government savings schemes available to help first-time buyers.

With the Help to Buy Individual Savings Account (ISA), for example, you can save up to £200 a month and the government will add another 25% to however much you save. So, if you put in the maximum £200 a month, the government will contribute £50 a month on top of this. The maximum government bonus you can claim is £3,000, and to earn this you’d need to save £12,000.

If you do already have a Help to Buy ISA, you can transfer your savings into a LISA, or save into both types of account. If you choose to do this, however, you will only be able to use the bonus from one of these accounts to purchase a property.

What are the additional costs when buying a home?

Remember that when you are saving up your deposit that you will need extra money to meet the additional costs associated with buying a property, including: stamp duty, legal fees, survey and moving costs.

If you’re buying a home for the first time, you’ll also need to think about how much you’ll need to furnish it and add this to your saving total.  

What is a mortgage?

A mortgage is essentially a loan that you take out to help you buy a property. You usually pay it off over a specific number of years whilst you reside in the home.

Often mortgages begin with a special rate which typically lasts from two to five years. Once that rate ends you will then move onto what is known as the lender’s standard variable rate (SVR). This is usually higher than the rate you started on, but you will be free to remortgage to another special deal at this stage.

When you apply for a mortgage, as with any other type of loan, lenders will want to be certain about your income and that you can afford to pay back what you owe. This mean that they will ask for lots of information about your income and outgoings to ensure you can afford the monthly payments.

How long do mortgages last?

A typical mortgage term is usually 25 years, but some lenders do allow longer terms of up to 35 years or even longer, dependent upon your age and circumstances.

You may opt for a shorter term if you prefer. You may decide, for example, that if you can afford it, you want to select a 15- or 10-year term, so you can pay off your mortgage sooner.

The longer the term you choose, the lower your monthly payments will be, but the more interest you will end up paying overall. If you choose a shorter mortgage term, your monthly payments will be higher, but you will clear the mortgage quickly and pay much less interest.

When choosing how long you want your mortgage to be, consider carefully how much you can afford to pay each month.

Do I need a mortgage?

Most people won’t be able to afford to buy a property outright, so unless you are fortunate enough to have a significant amount of savings, you will usually need to take out a mortgage to get on the property ladder.

The amount you will need to borrow depends on how much you have managed to save up as a deposit. You will usually need to save at least 5% of the property value to qualify for a mortgage, but the more you can afford to put down, the wider the choice of mortgages available to you.

Can I have a mortgage?

Whether or not you are eligible for a mortgage depends on your individual circumstances.

You will need to demonstrate to lenders that you will be able to afford the monthly payments, and they’ll also want to see how you have managed debts previously. In order to this, they will need a copy of your credit report, so it is worth requesting a copy for yourself before applying so you can see if your score is good. There are numerous ways to improve your credit score, including: closing down any credit accounts you no longer use, paying off or reducing as many debts as possible, and making sure you never miss debt repayments.

Speak to us today for jargon-free mortgage advice

We are an mortgage advisor based in Southport and covering Merseyside and Lancashire. We work with clients across the region, including Liverpool, Manchester, Bolton, Preston, Wigan and St Helens, and sometimes further afield depending on the project.

Call Us: 01704 539492

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JB Financial Solutions Ltd is authorised and regulated by the Financial Conduct Authority (FCA).
Our FCA number is 531615.