How Much Deposit Do I Need To Buy A House?
Deposit Amounts needed | Mortgage Broker in Harrogate
Your individual circumstances will be the main factor on how much deposit you will need and what your end goal is that you are trying to achieve. Our Mortgage Advisors in Harrogate have put together a few questions which may open up a more clear explanation into how much you may need for your own mortgage situation.
Why Do I Need A Deposit?
In the past 100% were an option for many and were readily available as and when they were needed but nowadays, this isn’t the case and it is now a much more lengthy process if you’re looking into applying for a mortgage.
It appeases lenders the more deposit you put down as it reassures them you’re not a lending risk. If they chose to lend you 100% of the purchase price and then somehow, you weren’t able to pay it back, or fall into arrears, then they will need to take possession of the property and a small dip in house prices would mean that they will be at a loss.
Additionally, another way of viewing it can be that if you haven’t invested at least a minimum part of your finances, then it could be a bit too easy for you to walk away from the property, if things didn’t go to plan e.g. struggling with your monthly payments. Furthermore, if you’re not able to save up a minimum of 5% of the property purchase then it could also be perceived that you’re not at the position yet to be stepping onto the property ladder.
Will The Government Help?
If you are able to save up 5% from your own resources then there is the possibility of qualifying for the Government’s Help to Buy equity loan scheme. This scheme only applies to new properties only.
You will put forward the 5% and the Government will then loan you up to 20% to total a 25% deposit. 5 years after this happens, you will need to start looking into repaying the equity loan back, usually in the way of a remortgage in Harrogate or is available from savings you have been able to make in the meantime.
I’ve Got 5% Deposit – Is That Enough?
5% is enough in a lot of circumstances. Unfortunately not all lenders will accept a minimum of a 5% deposit though so this may restrict you and you will need a reasonable credit score to back this type of application up. There are lenders that would consider offering a 95% mortgage for someone with an average credit score but the rate of interest would be moderately higher – one of our Mortgage Advisors in Harrogate can usually help show you how to do this.
My Credit History Is Poor – How Much Do I Need To Put Down?
This may require Specialist Mortgage Advice in Harrogate. Most specialist Lenders wish for you to put forward at least 15% deposit if you have a poor credit history. This, again, is simply to reduce their risk in case a repossession occurs. It is much more difficult to obtain this type of mortgage than it was previously but it’s not impossible.
What About Buy To Let?
You’ve always needed to put down a larger deposit for Buy to Lets and most Lenders at the moment are looking for 25%.
Can I Take Out A Loan For The Deposit?
This could be possible but the vast majority of Lenders won’t let you do this, essentially this would still be 100% lending.
Can Someone Gift Me A Deposit?
Yes, this happens all the time. Generally, it’s “Bank of Mum and Dad” gifting or other family members but even family friends can gift you money as long as they can evidence the funds, prove who they are and confirm they are not expecting repayment of the gift.
Are There Any Cicumstances At All Where I Don’t Need A Deposit?
If you are buying as a sitting tenant at a discount from the open market value, from a family member or if you qualify for a discount under the Right to Buy scheme then normally you don’t need to put any of your own money in as the equity is already “built-in” to the deal.