The deposit is one of the most talked about areas when it comes to home-buying but how much do you really need?
Here we delve into the nitty-gritty to answer the deposit-related questions of first-time buyers.
The amount of deposit you’ll need in order to get a mortgage is worked out as a percentage of the value of the property.
Home-buyers with more than five per cent deposit have a more favourable selection of mortgages available to them the greater the deposit, the lower the interest.
According to Aaron Strutt of Trinity Financial, over the last couple of years lenders have really improved their propositions to make it easier to qualify for a mortgage. “If you are looking for the cheapest possible deal then you will typically need a 40 per cent deposit to qualify, but there are a range of options if you have a five per cent deposit. HSBC has a particularly low two-year fixed rate at 1.79 per cent for buyers with a ten per cent deposit. There is a £999 arrangement fee and the APR is 3.9 per cent,” he says.
If you can secure more than five per cent deposit, the advantages are manyfold.
The lower you can drive down your loan to value (the percentage of the house value that is mortgaged), the cheaper your rate will also be.
There is also a greater chance of being accepted. All lenders conduct affordability checks to deduce how reliable the borrower will be when it comes to the repayments, based on their income and outgoings.
Those with relatively low salaries may be unable to borrow enough and will need a larger deposit to make up the value of the property.
The Shared Ownership scheme is again aimed at first-time buyers and is a cross between buying and renting.
The buyer will own a share of the property and pay rent on the remaining share, usually at a reduced rate. Because the buyer only needs a mortgage for the share of the property, the amount required for a deposit is much lower than it would be than when purchasing the property outright.
If you're looking for a mortgage or require some advice on how much deposit you may need please get in touch with us!
