You should save at least a 5% deposit for a house, but the more you put away, the cheaper your mortgage repayments will be, and you’ll have a wider choice of mortgage deals.
If you’re looking for your first home at around £200,000, then you’ll need to save £10,000. This would be 5% of your total house price and would give you a 95% loan-to-value (LTV is the value of the property minus the money you borrow).
Banks are all about risk; they’re are a business at the end of the day. If you have saved a deposit, you have shown you can manage your money and are less of a risk. It also means there is a little money (equity) in the house if you couldn’t pay your mortgage and the property needed to be sold.
Banks will reward those with more equity and bigger deposits with cheaper rates, so if you can get to 10, 15 or 20% you’ll have a wider choice of cheap mortgage rates.
I don’t have a deposit; can I still get a mortgage?
You’ll struggle to get a mortgage without a deposit unless someone signs up to pay your mortgage if you can’t (a guarantor).
If you have saved 5% and you are buying a new build, then the Help to Buy scheme can provide an extra 20% interest-free for five years when you purchase a new build through the scheme – you’ll have access to some 75% LTV mortgage deals.
Buy to let mortgages are seen as riskier, so a bank will be looking for a 25% deposit usually.
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