Busting the myth of the big deposit
May 13, 2019
There is a bit of a secret when it comes to getting on the property ladder that many people don’t know about. And it’s all to do with what many see as the biggest obstacle to owning their first home: the deposit.
How much deposit do I need for a mortgage as a first time buyer?
When people talk about the house deposit, there seems to be a consensus that you need to save a certain amount of money towards a house before you’re even considered to be mortgage ready. However, that isn’t necessarily the case and there is no definitive average mortgage deposit. In truth, the amount of deposit you need for a mortgage as a first time buyer depends entirely on the region you’re looking to buy in, and the value of the property.
Average first-time buyer price in the UK (July 2018)
What’s the big secret to buying a first home?
Having a deposit is obviously a requirement to getting a mortgage but it isn’t the be all and end all. In fact, it’s just a small part of it, before applying for a mortgage you may want to consider how you can improve your credit score, as all lenders will look at your finances in detail
When it comes to applying for a mortgage, the lender will look at how much you can realistically afford to repay - not just the deposit you pay up front. In addition to how much deposit you have, some key questions you’re likely to be asked include:
- What are your outgoings against your incomings?
- What is your credit score like?
- Do you have any large debts such as a car loan?
These are typical questions a mortgage adviser would ask as they help to build up an overall picture of your financial situation. From a lender’s perspective, asking these questions helps them assess how easily you can afford their mortgage repayments and if there is a risk you might not be able to pay them back.
The help is out there - you just need to know where to look.
You are not alone when it comes to saving for a deposit and buying a home. The government has schemes such as the Lifetime ISA. This means you can save up to £4,000 each year and the government will top this up with a 25% bonus. This is a great starting point if you want to buy in the future.
You don’t need a 10% deposit to buy your first home.
Are you ready to buy now but don’t think you have a big enough deposit? Speak to one of our trusted mortgage advisers, as they may be able to find a way you could still get on the property ladder right now.
After a quick chat, you may well find it’s okay to put down a 5 per cent deposit, rather than a 10 per cent deposit. It might limit the mortgages available to you, but getting on the property ladder now could mean you gain equity if the property value increases over the next few years. A mortgage adviser will be more than happy to run through everything with you and help find a mortgage that is right for you.
However far away from buying a home you feel you are, it won’t hurt to have a conversation, and you never know, you might be pleasantly surprised!
Saving doesn’t stop when you apply for a mortgage
If you do get on the property ladder now, don’t forget that you don’t have to pay your deposit until the contracts are exchanged. This means you still have time to save as hard as you can over the next few weeks or months. Those extra pennies always help and can go towards things like stamp duty, legal and finance fees or even a new sofa or bed when you move in.
When it comes to property, understanding what you can actually afford to save and spend on mortgage repayments and what a home might really cost you can make the difference between it being a distant dream or a reality.
How we can help
Our mortgage advisers don’t just find a mortgage for you - they can help you put together a budget before you’ve even started looking at properties and guide you through the whole process. Don’t let the size of the deposit put you off - get in touch today to find out how we can help you afford your first home.
Mortgage Advice Bureau