Can I Buy a Home in Leeds with a Small Deposit?

Can I Buy a Home in Leeds With a Small Deposit?

You’ve managed to save up for a 5% deposit and are ready to start making offers on properties. However, you are still being let down and being asked for a larger deposit. Not being enough to save for a lerger deposit could be down to anything, e.g., sellers’ preference, other competition or your credit history.

From in-depth discussions about utilising the government schemes to simple points such as saving more money and waiting, here are some ways that can help you obtain a mortgage with a small deposit.

Different Government Schemes in Leeds

Taking advantage of government schemes can really help you through your mortgage journey. There are lots of schemes available that come under the ‘Own Your Home’ umbrella. These schemes were designed to allow opportunities for first time buyers and home movers to get themselves onto the property ladder.

Shared Ownership

The Shared Ownership scheme is very different. Shared Ownership lets you take a mortgage out on a percentage share of a property (usually between 25%-75%) and then pay the rest back via rent.

Since you are only taking out a mortgage on a smaller percentage of the property, your total deposit amount should be lower. Also, it’s worth knowing that you can increase the share of the property that you own further down the line if you want to. This can be a great stepping stone to get you onto the property ladder.

The scheme is a little complex in some cases. So, we’d recommend that you speak to a mortgage advisor in Leeds like us before diving headfirst into the scheme.

Lifetime ISA

A Lifetime independent savings account should be introduced when you’re thinking of moving or buying your first home in Leeds.

This is because it’s a savings account where your money grows year on year interest-free. You can put as much money in it as you’d like each month, as long as it doesn’t exceed a total of more than £4,000 over the year. This is the maximum that you can save each year.

Each year, the government will top up what you’ve saved by 25%. So, if you save up to the maximum you will get an extra £1,000 for free. The savings from the account can be used for one of two things: buying your first home or saving for later in life.

If you set up a Lifetime ISA at the very start of saving for a deposit, you may only require a small deposit as the lifetime ISA can cover some of it for you!

Right to Buy

If you’re currently living in a council house and planning to make an offer on the property, you may only be required to put down a small deposit, or in some cases not one at all.

This is because some lenders offer a right to buy discount through the government since you’ve already been living in the property.

95% mortgage guarantee scheme

This government-led scheme allows you to get a mortgage with just a 5% deposit. Therefore, if you go down this route, there shouldn’t be many reasons why you’ll be declined.

Of course, getting a mortgage is not guaranteed in any way shape or form. You’ll still be required to pass credit checks, affordability assessments etc.

Alternative to using government schemes

There are other ways besides using government schemes to get a mortgage with a smaller deposit.

Have an agreement in principle at the ready

An agreement in principle (AIP) or also known as a decision in principle (DIP), can boost your chances of getting a mortgage with a smaller deposit.

An AIP shows that a lender is willing to lend to you given that you can provide sufficient documentation to prove that you’ll be able to afford a mortgage. If you’re making an offer on a property, you may be putting yourself in front of someone who’s also put in an offer who doesn’t have an AIP in place.

In this situation, it’s not really about the deposit. The indication to the seller will be that they’ll be able to continue through the process quicker by choosing you. Either way, they’re selling their home, choosing you will just speed up their process!

Keep saving!

An obvious alternative would be to carry on saving up. Even pushing back your home buying journey for a further 6 months could boost up the total amount of your mortgage deposit.

Your small deposit could become much bigger if you knuckle down and save for just a little longer, in fact, it could get you over the edge that you need.

If there aren’t that many houses on the market that are appealing to you, there’s even more of a reason to wait for a little longer.

Remember that the 5%-mark changes depending on the property. If you want to move into a larger home, you may need to save up more anyway.

Taking out a loan to cover your deposit

This is a very specialist situation and often, lenders will not allow it. As a mortgage broker in Leeds, we’ve seen it happen before, but it’s always on rare occasions.

Taking out a loan to cover your deposit can sometimes affect your ability to get accepted and this is because you are essentially borrowing 100% of the mortgage.

This results in having to account for multiple repayments. Lenders will question whether you’ll be able to afford it or not. They can’t risk lending to you if that loan is going to affect your ability to keep up to date with your mortgage payments.

Again, this is a specialist topic, and we would advise that you speak to a mortgage advisor in Leeds and get in touch with us first. Taking out any sort of loan during the months leading up to your mortgage application could potentially be a bad idea.


Malcolm's
mortgage guides









What Does Remortgage in Leeds Mean?

Taking a look at what remortgage in Leeds means, what defines a remortgage in Leeds & the reasons that people may remortgage in Leeds.









Do You Need a Deposit to Remortgage in Leeds?

A look at whether or not you need a deposit if you are looking to take out a remortgage in Leeds on your property and what to consider.

Leedsmoneyman.com & Leedsmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.

Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk

The information contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
Should you have cause to complain and you are not satisfied with our response to your complaint, you may be able to refer it
to the Financial Ombudsman Service, which can be contacted as follows

The Financial Ombudsman Service, Exchange Tower, London, E14 9SR
www.financial-ombudsman.org.uk

© 2023 Leedsmoneyman

Leedsmoneyman, Wizu Workspace, 32 Park Cross Street, Leeds, LS1 2QH.

Moneyman Logo







Moneyman Logo




Moneyman Logo

Ask Your Question





    Moneyman Logo

    Moneyman Logo







    Moneyman Logo

    Book your Free Consultation

    7 Days 8am - 10pm

    Moneyman Logo

    Moneyman Logo