Expert Guidance Every Step of the Way
Your property may be repossessed if you do not keep up repayments on your mortgage.
Understanding Deposits and Loan to Value (LTV
The average deposit for First Time Buyers is typically 5% due to the high cost of properties, though some manage to save up to 10%. This deposit amount determines the Loan to Value (LTV) ratio, which represents the portion of the property’s value that is financed through a mortgage. For example, a 5% deposit means borrowing 95% of the property’s value. A larger deposit reduces the LTV, resulting in better interest rates and less stringent credit scoring from lenders, as the risk is lower for them.
FAQ'S
What is a mortgage deposit and how does a mortgage deposit work?
When you look to get a mortgage, as a rule you will put a deposit down. There are some exceptions, which we will come to, but generally you put a deposit down and then the lender will lend you the balance of the property cost.
So you save up, put some cash down and the lender provides the rest of the amount that you need to purchase the property.
How much deposit does someone need for a mortgage? How much should they save?
This is quite variable. As a minimum you will need 5%. But the more you save, the more lenders are potentially available to you – and depending on your credit score, the better the rates available as well. Lenders will be happy, because a larger deposit means less risk to them.
Saving for a Deposit: Tips and Government Schemes
Saving for a deposit requires budgeting and discipline. Opening a dedicated savings account, such as a Lifetime ISA, can help accumulate funds while earning a government bonus. These accounts, previously known as Help to Buy ISAs, provide a boost to your deposit savings.
Maintaining a clear goal and consistently saving can make a significant difference. Avoiding unnecessary expenses and adhering to a structured savings plan are crucial steps in achieving homeownership.
How Mortgage Brokers Can Help With Deposits
Mortgage brokers are invaluable when it comes to navigating the complexities of deposit requirements and uncovering the best options for First Time Buyers or those with unique financial circumstances. Unlike approaching a single bank or lender, brokers have access to an extensive network of lenders, including high street banks, specialist lenders, and those offering niche products that may not be directly available to consumers.
This broad access allows brokers to match you with tailored mortgage products based on your specific situation, such as shared ownership schemes, Deposit Unlock for new builds, or sub-prime lending for individuals with bad credit or limited credit history.
Vulnerable Customer
We understand that from time to time our clients may find themselves dealing with circumstances which could mean they are potentially vulnerable. For example, a change in health, caring for a family member or coping with the loss of a loved one. There are many different types of vulnerability, and what makes one person vulnerable might not affect someone else. When we are vulnerable, our need for financial advice may change. However, admitting vulnerability or seeking help can sometimes feel hard.
If this is something you would like to discuss with us, please ask for a copy of our support guide or download a copy here. This guide is designed to help explain vulnerability and the ways in which we might be able to support you. If you feel any of the circumstances in the brochure apply to you, please talk to us.
