How much deposit will we need to buy a property?

Posted on 4 September 2007

Me and my partner would like to buy in a couple of years.  We worked out we can probably get between £20-25,000 saved as a deposit in that time.  Our salaries total approximately £30-33,000 a year - what are our chances of getting a mortgage? I'm 20 and he's 22.


It's a difficult call as property prices are storming up so quickly. £20,000 is a huge amount on income of £33,000, especially after tax.  Don't forget that £20,000 now would give you a 15% deposit on properties worth £130,000 now, but in three years' time, assuming a 10% annual growth rate for property in that area, that same property would be worth £173,000, so your £20,000 deposit will only be worth 11% of the property.

A year ago it was a good idea just to take a 100% mortgage, as property value was going up so fast that the equity in the property would grow to the value of a 10% - 15% in the first year.  That strategy is a bit riskier now as property inflation has slowed below 9% on average, and into tiny figures in many places.  However, the principle is still there, which means that if you can afford to save for a while you certainly should as it is the lowest risk strategy available, but perhaps get on the ladder sooner rather than later.

Best of luck with it all

Katie

Category: First-time buyer, Valuations, Freehold, leases & unusual property

 

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