Usually, the minimum amount that you’ll need for a mortgage deposit is 5%. On the other hand, this can change depending on your credit history, type of house, where you live, etc.
It can also differ depending on what you are wanting to do. Do you want to move into the property or rent it out as a buy to let? Are you interested in a government scheme such as the Help to Buy Equity Loan?
Everyone’s mortgage situation will be different. Your total required deposit can change depending on your circumstances.
Looking back to the mid-2000s when the credit crunch was on the horizon and lenders were handing out mortgages to applicants who couldn’t really afford one. Some applicants didn’t even have any funds in place for a deposit! This led to the mortgage market crashing in 2008. It took 5 years for it to get back onto its feet during 2013.
Following the credit crunch, lenders will now always ask for some form of a deposit. They need confirmation that you’re a reliable applicant that’s going to be able to keep up to date with your mortgage payments. That’s why if you’re an applicant with bad credit, you may find it a little harder to get a mortgage.
With good credit and a green credit score, it’s more likely that you’ll be able to access a 95% mortgage. If you have bad credit, you may have to provide a 10%-15% minimum deposit.
The government will never pay for your mortgage deposit; however, they can help you out if you choose to use one of their mortgage schemes.
A few examples of the schemes that are included are the Help to Buy Equity Loan, Lifetime ISA and the mortgage guarantee scheme. To find out more about the government-led schemes available to you in Grimsby, you should go to ownyourhome.gov.uk for further information.
As mentioned before, 5% deposit is usually achievable with a clean credit history.
This can change depending on various factors such as your credit history, your lender and how the economy is performing. Most high street lenders will ask for a 5% deposit; usually, these lenders will often offer the best rates of interest too.
You need proof that you can afford a mortgage, just an AIP is not enough. Even if you’ve saved up to that 5% mark, can you afford to take a mortgage out on that property? Will you be able to maintain the payments over the whole mortgage term?
Unfortunately, if you have a bad credit history, it’s likely that you’ll have to put down a higher deposit. We’ve seen lenders ask between 10%-15% before.
Additionally, you may be only able to take out a specialist product. In this situation, as a mortgage broker in Grimsby, we would advise that you get specialist mortgage advice in Grimsby.
Our expert advisors can give you an expert’s opinion and help you find the best rate available to you based on your personal and financial situation.
Buy to let mortgages require a higher deposit. Lenders will want anywhere between 20%-40%. As a mortgage broker in Grimsby, we see high street lenders asking for a 25% minimum.
If you’ve already managed to build up a buy to let portfolio, lenders may be more likely to lend to you.
In the rare case that you are allowed to continue with a loan as your deposit, you must be aware that you are being lent 100% of your mortgage, so your payments will increase. You must compensate for both sets of payments, which lenders will not feel comfortable with.
If you have more questions about this topic, we advise that you speak with a mortgage specialist in Grimsby like us. We are available to talk all 7 days a week, so if you have any questions, feel free to give us a call.
Lenders regularly encourage gifted deposits as they are a great stepping stone for first time buyers to get themselves onto the property ladder.
Gifted deposits are usually handed from family members or friends. The gift will have to be evidenced correctly and shown where it has come from. The person gifting the deposit will also have to sign that it is a gift and not a loan.
There are few situations where you will not need a deposit. One example is if you are buying as a sitting tenant at a discount from the open market value. Another would be if you were buying from a family member.
On the rare occasion that you’re able to get a mortgage without a deposit, you still may need help from a professional to assist with evidencing your income, affordability, credit score, etc.
Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.