Everything You Need to Know
For so many people, one of the biggest hurdles when trying to buy a home is saving for a deposit. Unfortunately, many people do not look into how big a deposit they might need, which can see them rejected by lenders when they do apply. So, here is your guide on how much you should save, and how advice on mortgages from a trusted broker can help those who might need a bigger deposit, such as those with bad credit.
A Standard Deposit
In normal circumstances, most UK mortgage lenders require a deposit of at least 5% to 10% of the property’s price. So, if the home you are hoping to buy is worth £450, 000 you will need between £22,500 and £45,000.
However, while saving up for the bare minimum can be enough to secure a mortgage, there are advantages to putting down a larger deposit. These include better interest rates and higher chances of approval. You can also expect smaller monthly payments thanks to the reduced size of the loan. It’s for these reasons that many buyers aim to save a little more.
When is a Larger Deposit Needed?
There are some circumstances where a larger deposit isn’t just a bonus, but can be the defining factor in getting your application approved:
Poor Credit History
If you have a poor credit history with things like outstanding debts or bankruptcies, then lenders will view you as a higher risk. They often require a larger deposit as a result, so that they can lend you less money.
Self-Employment
Self-employed individuals, along with those with irregular income, may need to provide a larger deposit. This is because your income stability can be harder to assess, so lenders will err on the side of caution. However, providing enough documentation of your finances can help.
You’re Letting Out the Property
For those purchasing a property as an investment rather than to live in, a larger deposit will most likely be required. Lenders have stricter requirements in place for landlords, as rental income is not always guaranteed.
The Importance of Working with a Mortgage Broker
Navigating mortgage deposit requirements can be something of a minefield, especially if your circumstances are more complex. This is where a mortgage broker comes in! They have access to a wide range of lenders, and after getting to know you, will be able to identify ones who accept the size of deposit you have. They’ll then work on your application with you, ensuring it is completed correctly, and you are presented in the best possible light.
The terms of your mortgage can be a worry, especially if you aren’t bringing a large deposit to the table. By matching you with the right lender, a broker can help secure the lowest possible interest rate, reducing the overall cost of your mortgage over time.
What to Do Now
The amount of deposit required for a mortgage can vary depending on your job, what kind of property you are buying, and a wide range of other factors. If you work with a rusted mortgage broker, they will be able to help you.
Adam Smith