Saving for a deposit is often one of the biggest challenges facing prospective homebuyers. It’s easy to assume you need to save tens of thousands of pounds before you can even think about getting on the property ladder, but that’s not always the case.
The amount you’ll need depends on the type of mortgage you choose, the property you’re buying, and your financial circumstances.
What’s the Minimum Deposit?
Many lenders offer mortgages with a minimum deposit of 5% of the property’s purchase price. This means that if you’re buying a home worth £250,000, you could potentially purchase it with a deposit of £12,500. However, while smaller deposits can help buyers get onto the property ladder sooner, they don’t always offer the most competitive mortgage rates.
Why a Larger Deposit Can Save You Money.
Generally speaking, the larger your deposit, the lower the lender’s risk. This is measured through something called the Loan to Value (LTV) ratio. For example, a buyer with a 20% deposit has an 80% LTV mortgage, while someone with a 10% deposit has a 90% LTV mortgage.
Lower LTV mortgages often come with lower interest rates, reducing your monthly repayments and potentially saving thousands over the life of your mortgage.
Don’t Forget the Other Costs.
Your deposit isn’t the only expense involved in buying a property. You’ll also need to budget for solicitor’s fees, property surveys, mortgage arrangement fees where applicable, moving costs and, depending on the purchase price, Stamp Duty. Planning for these additional costs can help avoid unnecessary financial pressure later.
Can Family Help?
Some buyers receive financial assistance from family members through gifted deposits. Many lenders accept gifted deposits, although they’ll usually require confirmation that the money is a genuine gift rather than a loan.
An experienced mortgage adviser can explain the documentation required by different lenders.
How FPM Advice Centre Can Help.
Every buyer’s circumstances are different. At FPM Advice Centre, advisers take the time to understand your finances before recommending suitable mortgage options. With access to the whole market, they can identify lenders offering competitive products based on your deposit size and personal circumstances.
Whether you’re buying your first home or planning your next move, independent mortgage advice can help ensure your savings work as hard as possible.