Deposit For A Mortgage
If you are currently looking for a mortgage you may be wondering exactly how large of a deposit for a mortgage you would need.
There is no standard amount that borrowers need to save as a deposit for a mortgage, the size of a deposit you will need to put down will be dependent on how much you wish to borrow and how low you want your interest rates to be.
Generally speaking however the larger the deposit you can afford to put down the cheaper your mortgage deal will be.
Loan to Value
The Loan to Value (LTV) of a mortgage refers to the ratio between the size of the deposit and amount borrowed. You will often see different mortgage plans advertised by their maximum LTV. So for example if you wished to purchase a house worth £200,000 and you could afford to put down £10,000 as a deposit then you may be able to get a mortgage with an LTV of 95%
However your may be able to get a mortgage with much cheaper rates if you could afford to put more money down as a deposit and get an LTV of 70% or 60%.
How much exactly you can borrow from a lender will depend on more than just how much you have saved as a deposit.
A lender will want to assess your affordability, this essentially means they will want to check what your monthly income is including both your salary as well any additional sources of income, they will also want to see an estimate of what your average outgoings are taking into account everything from costs for transport, food, entertainment, utility bills and dependants as well as things such as existing credit commitments like car loan payments. If you have a bad credit history this can affect your ability to get a mortgage.
Based on this each lender will be able to assess exactly how much they would be willing to loan you by estimating how much you can afford to pay in monthly repayments. They will also take into account things such as your credit score.
Help to buy
There are currently several government schemes available designed to aid borrowers with smaller deposits to buy property.
Help to buy Equity loans
With the equity loan scheme, borrowers who can afford to put down a deposit of 5% can borrow up to 20% of the cost of a new build home, enabling them to apply for mortgages with LTV’s of 75%.
For example if a borrower was looking to purchase a new build home worth £200,000 and had a deposit of £10,000 could then borrow £40,000 from the Government and use a mortgage to make up the remaining £150,000 reducing how a borrower's mortgage rates.
With the Mortgage Guarantee scheme, the Government allows the lender to purchase a guarantee on a mortgage loan, so for a borrower who could put down a £10,000 deposit on a 200,000 home the government would be able to guarantee £30,000 to the lender in case the borrower defaulted. Which allows them to offer more high loans to value mortgages.
If you want to find out more about mortgages, speaking to an independent mortgage adviser may help you, you can fill in the contact form on this page to request a free initial consultation about mortgages from a Fair Mortgages Adviser.
Our Mortgage Adviser Service
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Special features of what we offer include:
Whole of market service - we compare over 60 UK lenders to help you find the right deal for your circumstances
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