The happy days of 100% and even 125% mortgages seem a long time ago. Now the credit crunch is behind us, lenders tend to be more confident again to offer 95% mortgages.
We feel that it is reasonable that you should show you can save each month. It also gives lenders comfort that you have some “skin in the game”. In other words, you have something to lose should it start to become more challenging to keep up your mortgage repayments.
We know it’s challenging to save up a deposit for many people, and this is their primary barrier to entry into the property market. It is daunting if you have a family or are in rented accommodation. We do get many questions about deposits so we’ll try to answer as many as I can for you here.
Short answers, yes. The higher the deposit the lower interest rate you will receive and this usually is more cost-effective and helps you.
Reasons being you appear more reliable to them. Products offered in bands of five. These bands differ in price depending on various factors such as your deposit.
The percentage of your mortgage provides lenders with an idea of how invested you are to your mortgage, although considering – the higher the interest rate, the more expensive. This means that the higher your deposit, the more secure you will be when it comes to purchasing your dream home meaning you will be happier in the long term.
In a limited number of circumstances, it can be successfully achieved. The lender will make the monthly payment as an additional credit commitment, therefore, grant you a smaller mortgage.
As a result, one will qualify if you hadn’t borrowed the deposit. Most lenders oppose this as you are essentially borrowing 100% of the purchase price.
Yes, most accept gifted deposits from family members and friends can be acceptable too. The sender of the gift will need to confirm it’s a gift, rather than a loan, and need to produce ID and proof of funds for anti-money laundering purposes.
Others have turned to the bank of Mum and Dad, this is where the parents of the applicant gift their children funds towards the deposit.
For anti-money laundering purposes, providing bank statements help to evidence funds. Lenders like to see how the money is being built up as this provides more genuine insight.
If you have deposited a large amount into your account, you may need evidence to support this.
For example, if you have sold a car, then you’ll need a receipt and the amount you have sold the asset for would match the amount paid into your bank account. This will highlight reliable sources backing up your finances.
If you are selling a property, then the memorandum of sale provided by the estate agent is your proof.
It’s still 5% as a minimum if you qualify for the government’s Help to Buy scheme. It can be topped up to 25% via the equity loan so you will obtain a lower rate mortgage.
Choosing to opt-out from the scheme results in the 20% deposit gift provided by the government changing meaning you will have to pay it back as a loan.
Usually, if it is a genuine discounted purchase, i.e. the house is worth £100,000, and you have been offered it, for example, £90,000, then some lenders will accept this as your guaranteed deposit.
This works well if you have the Right to Buy from the local authority or another social landlord.