Mortgage Deposit

03/09/2019 by

Sarah Teff, one of our expert mortgage advisers, explains everything you need to know about securing a Mortgage Deposit.

Video breakdown

0:44 – What is Your Deposit Amount Based On?
1:03 – How Much Deposit Will You Need?
1:29 – What Is the Average Deposit for First-Time Buyers?
2:16 – How Can You Reduce the Amount You Need in Deposit?
3:07 – What Deposit Do You Need for A Buy-To-Let Mortgage?
3:26 – When Do You Pay Your Deposit?
3:50 – How Long Does This Process Take?
4:08 – What Happens If Your Deposit Is Coming from The Sale of Your Previous Property?
4:20 – What Is A Holding Deposit?
4:37 – How Much Is A Holding Deposit?
4:57 – How to Save For A Deposit?
6:32 – Summary

View Transcript

Securing a mortgage deposit is one of the main struggles most buyers face. In this video we’ll help you figure out how much you need? How it impacts the rates available to you? And how you pay it?

It doesn’t matter whether you are previous high miner, a first-time buyer or commercial property investor, if you’re buying a new property with a new mortgage, you’ll probably need to out down a deposit.

  • What is your deposit amount based on?

The amount you’ll pay a deposit depends on the value you’re borrowing and the mortgage product you’ve selected, your deposit it’s worked out as a percentage of the value of the property you want to purchase so the higher the property value is, the more you’ll potentially pay in deposit.

  • How much deposit will you need?

The maximum mortgage you can take out is 95% which means you must provide at least 5% in deposit, however a lot of lenders ask for deposit of 10% or more, it’s worth to contribute as much to deposit as you can, to make you appear less risky to lenders that then would give them access to more competitive rights.

  • What is the average deposit for the First-Time buyers?

The average deposit for first-time buyers in 2018 was £33,127 or 16% of the property value.

In this graph you can see just how property prices have affected first-time buyers’ deposits across the country, a 20% deposit needs to be a lot bigger in London, around the South-East nowadays, thanks to increases in property values in these areas. The North Scotland, Northern Ireland and Wales have remained stable, even slight decreases making a much more affordable areas for those struggling to save a deposit. It can take years to save this kind of money though and it’s near enough impossible for some people, thankfully there are some options available that can reduce how much deposit you need.

  • How can you reduce the amount you need in deposit?

Some lenders will offer you 95% mortgage if your parents put up their own property as security in addition to the property you’re buying, this means you’ll only need to save a 5% deposit.

  • Gifted deposits

Your parents can also give you your deposit as a gift or lime but be aware that if they lend you your deposit rather than give it as a gift it could affect your mortgage eligibility. Most lenders only accept true gifted deposits.

  • Help to buy scheme

The government also offer multiple helped buyer schemes which aim to help first-time buyers and previous owners who struggle in save enough for a deposit on a house or a flat.

  • What deposit do you need for a buy-to-let mortgage?

Via select properties are slightly risky investments for lenders, so rates provided for mortgages are higher and lenders often require a larger minimum deposit, this is usually at least 25% to 40% of the property value.

You normally pay your deposit to your solicitor one or two days before the exchange of contracts. The solicitor will hold on to the deposit until completion. At completion the mortgage comes free, and it is added to the deposit money to make up the full sale price of the property. The solicitor will then pass this all to the vendor servicer to complete the sale.

  • How long does this process take?

There’s usually a gap between an exchange to contracts and completion of a week or two, this can sometimes be longer, particularly in certain situations, like when buying a new build property.

  • What happens if your deposit is coming from the sale of your previous property?

If your whole deposit is coming from the sale of your previous property, then your solicitor will usually make alternative arrangements.

  • What is a holding deposit?

You may be required to power a holding deposit on your new home, this is different from your mortgage deposit, a holding deposit shows about your seriousness about purchase of their property and prevents from setting it to someone else.

  • How much is a holding deposit?

A holding deposit is typically between £500 to £1,000, but it’s ultimately up to the seller, unless it’s been set the amount. They normally decide on an amount which is affordable but high enough to discourage either party from withdrawing from the transaction.

  • How to save for a deposit?

In the UK we are lucky to have a lot of different that make saving for mortgage a little easier, some ways to save for your first time include:

Returning to your parents’ home to reduce rent costs.

Moving back in with mom and dad is rarely anyone’s first choice but it can be an effective way to save up for a house. Any rent you pay will not be cheaper than paying for your own place so it’s worth it in the long run.

Ask the bank of mom and dad.

Most first-time buyers need a little financial support from their parents in the form of a gift or loan, a lot of lenders are unfazed by parental donations, but it’s smart to speak to a broker first as they can find you a lender that’s happy to accept gifted deposits. They help to buy on yourself.

This is a government scheme for first-time buyers who need help saving to buy a home that’s up to 250 thousand pounds, it’s basically a savings account for your mortgage deposit, except that the government boosts the savings you put into the account by 25%. You can add up to £200 each month and can receive up to £3,000 in total.

Help to buy equity line.

The help to buy equity line is useful for people who wants to buy a newly built property. The government lend you a percentage of its value up to 20% for a property outside of London and up to 40% per property inside of London. You don’t need to be a first-time buyer to receive the help buy equity line, but you can only use it to purchase a newly built home valued up to 600 thousand pounds.

So that was our guide to moving home, thank you so much for checking out our video. If you want to watch more videos like this, then please subscribe and turn on your post notifications, that way you’ll receive a notification next time we post.

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