The big question … How much mortgage deposit do I need?
So you’ve decided to purchase your next property and you’ve spent ages looking at mortgage schemes and the different lenders. The first thing you should work out is how much deposit you can afford or save up. Obviously the more you can save up the better. This means you’re more likely to be accepted by a mortgage lender plus your repayments will be lower.
Technically it is possible to get a mortgage with just 5% deposit. However in today’s more stricter market you will probably be looking at 10% deposit. This could even rise to 15% dependent on the scheme and mortgage lender you have chosen. Due to the pandemic many lenders are staying away from low deposit schemes now. This may of course, change in the future.
To give you an example of what deposit you might need see below for a £300,000 property:
- 5% Deposit = £15,000
- 10% Deposit = £30,000
- 15% Deposit = £45,000
It goes without saying the more deposit you can save up the better. Your own repayment costs and for the chance of being accepted is greater. Mortgage deals and schemes are changing daily. Don’t be tempted to choose the deal with the lowest rates as this doesn’t necessarily mean you get the best deal. There could be hidden fees or a good introductory rate but very high normal rate once your low rate period has ended.
100% mortgages are also now a thing of the past in most cases. This is due to the risk they come with for both lender and borrower due to having negative equity. To be in with a good change of being accepted for a mortgage and gaining access to some very good rates we advise to target saving up 10% deposit, this opens you up to many more lenders on the market.
How much can I afford?
One thing you need to know also is how much you can afford to pay each month for your mortgage repayments. Also consider early repayment charges as you may decide to sell the property or change mortgages at a future date.
You can use our handy mortgage calculator to work out some rough figures. Please always bear in mind these will most likely change in an official application. Saving a larger deposit will mean cheaper monthly repayments, improved chance of getting accepted, better deals and obviously give you a bigger buying budget.
Deposits in different areas
If you are buying a property in London and the South East you may require a bigger deposit due to house prices being higher in these areas. Remember the more you can put down as a deposit the more you save on interest.
If you are a first time buyer you can get help from the government with their help to buy scheme. This is a scheme where the Government lends you up to 20% (40% in London) of the cost of the newly built home. This is where it’s limited though, you can only use these scheme on a newly built property.
You won’t be charged any fees on the 20% loan until after the first 5 years of owning your new home. You usually have to contribute by saving up 5% of the deposit with this scheme.
How can we help?
Here at Mortgage Squared we can help with all your mortgage needs including the Government help to buy scheme. We have access to the whole of market and the latest rates and schemes. You can be sure you’re getting quotes from all the major lenders and the latest deals and rates out now. We aren’t tied to one lender or company we search the whole market.
We can also help with all other aspects of buying a property such as conveyancing and surveys. Our expert team can take care of all this for you.
Always remember to work out your full outgoings so you know exactly how much you can afford to borrow.
Call us now for a chat with us 08081 551 807