Usually, the minimum required deposit that you’ll need for a mortgage will be 5%, however, this can vary depending on a number of things. For example, it could be down to your credit history, type of house, where you live, etc.
It also depends on what you are trying to do. Are you planning to move into the property or rent it out as a Buy to Let? Are you thinking of buying the property through a government scheme such as the Help to Buy Equity Loan?
Everyone’s situation is different, so make sure that you are aware that the amount of deposit that you need can change depending on the circumstances.
Let’s take it back to the mid-2000s when the credit crunch was on the horizon and lenders were handing out mortgages to people who couldn’t even afford one. Some of them didn’t even need a deposit to obtain one! Of course, this didn’t work out and the mortgage market crashed in 2008 and didn’t get back on its feet until 2013.
This is why lenders now require a deposit. They need to be certain that you’ll be able to afford a mortgage and be a reliable borrower. That’s why applicants with bad credit usually have to supply a higher deposit amount; they’ve had credit issues in the past and they could be unreliable and not be able to meet their mortgage payments. This isn’t saying that you cannot get a mortgage with bad credit, it could just be a little harder to.
Assuming you’ve got a good credit history and your credit score is green, it’s more likely that you’ll be able to access a 95% mortgage. If your credit score isn’t as good, you may expect a 10%-15% minimum.
The government won’t pay for your mortgage deposit, however, they can help you put down a deposit through the use of their mortgage schemes. The schemes include 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 Leeds, you should check out our government schemes article.
One of these schemes could be the key to unlocking the start of your mortgage journey!
Yes, at the time of writing this (09/06/2021) a 5% deposit is good enough. However, this could change depending on the lender that you’re using. You’ll find that most high street lenders allow a 5% deposit; these are also the lenders that will often offer the best rates of interest.
You’ll also need to prove that you afford a mortgage. You may have saved up to that 5% mark, although, you may not actually be able to afford the rest of the costs that comes with a mortgage. You will have to maintain your mortgage payments for the whole of your mortgage term.
As briefly mentioned above, if you have a bad credit history, you may be asked to provide a deposit of around 10%-15%.
Additionally, you may be only able to access specialist mortgage products. If this is the case, you should get Specialist Mortgage Advice in Leeds; we can still give you our expert opinion and help you find the best deal available to you based on your personal and financial situation.
You will require slightly more to put down a deposit on a Buy to Let property. It’s always been like this, it’s usually anywhere between 20%-40%. As a Mortgage Broker in Leeds, we’ve seen that most High Street Lenders ask for a 25% minimum.
There are some factors that can help you get a Buy to Let mortgage, for example, if you’ve already built up a Buy to Let portfolio, lenders may be more likely to lend to you.
In some cases, this is allowed, however, in most cases it is not.
Lenders rarely accept deposits that have come from another loan because then basically you are being lent 100% of your mortgage. If you have more questions about this topic, we would advise that you speak with a mortgage specialist.
A Mortgage Broker in Leeds like us is available to talk all 7 days of the week, so if you have any questions, feel free to get in touch.
Lenders always encourage gifted deposits as they are a great way for First Time Buyers to get onto the property ladder. Gifted deposits are exactly how they sound, they’re when a family member or friend gives you a lump sum of money to use towards your deposit.
You are able to use this gift as long as you can prove where the original funds came from. The person who has gifted you the deposit will also have to confirm in writing that it is not a loan, it is a gift.
There are only a couple of different situations where you won’t need a deposit for a mortgage. One would be 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. Finally, if you qualify for a discount under the Right to Buy mortgage scheme, then normally you don’t need to put any of your own money in as the equity is already “built-in” to the deal.
Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.