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    The biggest question that most first-time buyers have is, how much deposit will they need to save until they can buy a house?

    With house prices continuing to rise and the lending crisis tightening, it is becoming more difficult for people to save the best amount of money they need to buy a home. Many first-time buyers are unsure how long they need to continue saving before they can get their desired mortgage.

    This guide will tell you everything you need to know about how a mortgage deposit works and how much a first-time buyer will need for a deposit.

    What is a mortgage deposit?

    Before you start approaching mortgage lenders as a first-time buyer, it is essential to understand how mortgage deposits work. The deposit is simply a lump sum of money that you pay towards the total value of the house.

    What percentage of deposit do I need for a mortgage?

    In most cases, you will need a mortgage deposit of at least 5% but it is recommended that you save for a 10% deposit or more if possible as this will give you more options from the mortgage lenders. You will then borrow the rest of the money to pay for the house in the form of a mortgage, which is paid back in monthly instalments.

    Our advisors experience: In 2021 we saw a return of more 95% mortgages, however, at the moment we are seeing less and less of these products available. This is due to the current cost of living crisis and high interest rates. Our mortgage advisors highly reccomened saving a 10% deposit as there are more 90% mortgage products available.

    How much deposit for a first time buyer?

    In most cases, first time buyers will be expected to put down a mortgage deposit of at least 5% of the total market value of the house, leaving you with a 95% loan-to-value mortgage. If you can save a 10% deposit to get a 90% loan-to-value mortgage then you will have a bigger range of mortgage products and deals available to you.

    To get an idea of how much this percentage equates to in real terms, we should consider the average house prices, which vary throughout the UK.

    How much deposit do you need for a house?

    There is a big difference in the average house price in England and Wales, for example. In England, the average terraced house in 2022 cost £250,778, meaning that your 5% deposit will be £12,539.

    However, the average terraced house price in Wales is just £168,000 so your deposit amount would be much lower at £8,400.

    The average terraced house prices in Scotland however are £155,000 which would need an even lower deposit of £7,750.

    The lowest of the UK average terraced house prices is Ireland at £138,942 which would need the lowest deposit yet of £6,948.

    Mortgage lenders and lending criteria

    It is worth noting that the current turbulent market has affected all mortgage lenders and as they usually are in uncertain economic times, lenders are being more cautious at the minute. This means that nearly every lender will require a 10% deposit rather than the typical percentage. There are still some 5% mortgages available, but they are more difficult to find at the current time.

    Before you start the journey to buy a home you’ll need sound advice on what property price you will be able to afford.

    Lets work out how much mortgage you can afford

    Fee FREE Mortgage Advice

    Talk to a fee free mortgage broker as you’ll need to work out:

    • how much impact does having a bigger mortgage deposit will have
    • how it will affect the mortgage interest rates
    • how much do you need to save
    • How much your monthly repayments on a mortgage will be before you apply.

    Average deposit for a house UK

    A deposit of 5% was widely accepted by mortgage lenders in 2021 into 2022. Due to the current cost of living crisis, most lenders prefer and sometimes require a 10% deposit.

    The average property value in the UK is £286,397, this means that a 10% deposit needed to buy a house in the UK would equate to £28,640.

    As you start to save for your house deposit you should ask yourself the following questions.

    Should I put down more than the minimum deposit?

    There will be a need to put a 5% minimum deposit for most mortgages under normal circumstances, it is advised that you save for a deposit of 10% which will get you better mortgage deals as it will be at a lower loan-to-value. The bigger the deposit you have in savings the more mortgage options you will have as a home buyer. The average deposit mortgage brokers are recommending is 10% at present. The mortgage rates and more importantly the monthly payments to mortgage lenders will also be lower, making it easier to manage your finances in the future.

    Save a higher deposit for more mortgage options

    By saving for larger mortgage deposits, you are able to buy a more expensive home and you have more flexibility when it comes to choosing a mortgage deal.  Talk to a mortgage broker who will work out how much you will be able to borrow based on savings and income. Each bank and building society will have different lending criteria and will offer a different interest rate.

    How much mortgage can I afford?

    A mortgage lender will consider your income when deciding how much they are willing to give you. This is to reduce their risk and ensure that you can keep up with the monthly repayments. In most cases, a mortgage lender will give you around 4.5 times your annual salary, this is known as an income multiple mortgage.

    So let’s give an example of an income multiple of 4.5 times your salary. If you earned £25,000 a year, for example, you will be able to borrow around £125,000. If you are hoping to buy a house that is worth £150,000, you’ll need to save a deposit of at least £25,000, which is much more than 5% of the property value (£7,500).

    Can monetary gifts be used for a deposit?

    Due to the need to put down a bigger deposit many young people are now reliant on their parents or family members for the money that they need to get a mortgage. Also, it’s worth remembering the bigger the deposit the lower the monthly repayments will be on your first home. How much the average mortgage payment costs will also depend on your deposit.

    When you have to pay rent it’s incredibly difficult for people to save, especially if they live in an expensive city. Many first-time buyers are unsure whether they can buy a home with money that has been gifted or whether they need to raise the money for a deposit themselves.

    The short answer is, yes, you can get a mortgage for your first home or subsequent home with a gifted deposit. However, there are some hurdles that you may face because certain banks will not accept any gifted deposit at all, which means that your choice of mortgage is more limited. Some banks also put caps on the amount that is allowed to be contributed by parents. Nationwide, for example, specify that only 25% of the deposit can be gifted by parents and the other 75% must come from the purchasers’ own savings.

    Lenders may also ask parents to clarify that they understand that the money is a gift and they do not expect to own any portion of the property in return and they don’t expect to be paid back at any time. You will find that most banks are also very cautious about monetary gifts from friends.

    Lets work out how much mortgage you can afford

    Can you buy a property without a deposit?

    Many people find that they are able to cover the monthly mortgage payments but they cannot get onto the property ladder or housing ladder because they’re unable to afford the deposit. This is why a first-time buyer could easily wonder whether it’s possible to get a mortgage without saving for a deposit.

    Technically, it is possible to get a mortgage without a deposit, and this is known as a 100% LTV mortgage. The bank agrees to lend you the full amount to purchase without any down payments. Although this makes it easier to get onto the ladder, there are some significant downsides you need to consider.

    Firstly, they are more difficult and in the current cost of living crisis almost impossible to get. In most cases, a 0% deposit would need to use a guarantor. This is somebody (usually a parent) who agrees to cover the cost of the mortgage should you default on the payments. Some banks even require the guarantor to put their own home up as collateral, which is a serious risk for them.

    You are also very unlikely to get a 100% mortgage if you have a bad credit score or if you have outstanding debts. Even if your credit score is in good shape, banks are unlikely to give you a 100% mortgage until you are completely debt-free.

    Negative equity is the other big danger to consider. This is when the value of your home drops and it is now worth less than what you owe the bank. When moving home or attempting to remortgage, this can lead to some significant losses. As you pay off more of the loan, negative equity is less of a problem, but it’s a big danger in the first few years of a 100% mortgage.

    What additional costs do you need to cover?

    Saving for a deposit isn’t the only thing to consider because there are more costs associated with buying a property and moving home.

    Stamp Duty Cost

    You pay Stamp duty when you buy a residential property or land costing more than £250,000.

    Read our guide on How much is stamp duty?

    Stamp duty has several rate bands.

    1. £0 – £250,000 =  Zero
    2. £250,001 – £925,000 = 5%
    3. £925,001 – £1.5 Million = 10%
    4. Over £1.5 Million = 12%

    There is no stamp duty for first-time buyers on properties up to a value of £425,000. For properties over £425,000, there will be duty due on the percentage over that amount.

    Homebuyers Survey

    Before agreeing to buy a house, it’s important that you have a survey carried out to identify any potential maintenance issues. The cost of this varies a lot depending on the size of the house and the level of detail that you want, but you can expect to pay a minimum of £400 for a basic survey.

    What are the different types of homebuyers survey?

    Homebuyer surveys are a good way to avoid surprise repair costs further down the line. There are different types of surveys available and these are

    • RICS Condition Report
    • RICS HomeBuyer Report
    • RICS Building Survey
    • Building or full structural survey
    • New-build snagging survey

    Learn about Homebuyer Surveys and Costs here.

    Lets work out how much mortgage you can afford

    Concluding how much you need for a deposit

    Below we list the takeaways from this guide, hopefully, you fully understand mortgage deposits now. If not or if you need help getting a mortgage, get in touch with our expert mortgage team for first time buyer mortgage advice.

    What is the minimum deposit?

    If you are wondering, how much deposit you need to buy a house, the short answer is at least 5-10%.

    Greater deposit percentage = greater mortgage flexibility

    Putting down a larger deposit is the best way to secure a better interest rate, and it’s important to factor in the added costs when you are drawing up a savings plan as well.

    With over 90 different mortgage lenders offering thousands of different interest rates and incentives there is no doubt that the more savings you have the bigger house deposit will give a bigger range of mortgages available to you.

    Free deposit interest

    Open a savings account and get saving. There are government schemes like the help to buy savings account that might be worth investigating. Another brilliant Individual Savings Account (ISA) which is popular in 2021 is the Lifetime ISA (LISA).

    Lets work out how much mortgage you can afford

    Frequently Asked Questions

    So we have already learnt that in most cases, a mortgage lender will give you around 4 times your annual salary. So, if you were looking to get a mortgage with a £10,000 deposit it would need to be at least 5% of the value of the property you are hoping to buy. This means that the overall value of the home would have to be a maximum of £200,000.

    Don’t forget that you would also need to suit the affordability of the mortgage. The individual or couple would need to have an overall combined annual salary of at least £47,500.

    Let’s say you have a minimum deposit amount of 5% and are looking to get a mortgage for a property valued at £250,000. You would need at least £12,500. You would also need to suit the affordability of the mortgage. You as the sole applicant or as joint applicants would need to have an overall combined annual salary of at least £59,375.

    The shared ownership scheme is designed to help people get on the home-buying ladder by buying a house in conjunction with their local housing association. If your household earns less than £80,000 per year and you are a first-time buyer, a previous house owner that is currently unable to afford a property, or a current shared owner, you qualify for the scheme.

    The share you can buy can be anywhere between 25% and 75% and depends on how much you can afford. The housing association then buys the rest and you share ownership of it. In the future, you are able to buy more shares in the property until you eventually own it outright.

    Because you are only buying a portion of the home, you can do this with a much smaller mortgage deposit, making it easier to buy your first home. However, you do not own the home yourself and if the property value increases, you may struggle to buy more shares in the future.

    If you are buying a home with the intention of renting it out you’ll need a bigger deposit. When applying for buy-to-let mortgages, you will usually be expected to put down at least a 25% deposit. Just like residential properties, you will find it easier to get mortgages and mortgage deals with favourable interest rates if you are able to put down more than the minimum amount.

    Some lenders may need a bigger deposit of 40% and there are other requirements before you can get a buy-to-let mortgage. For example, you will struggle to find lenders that will agree to give you a mortgage if you earn less than £25,000 per year, regardless of the mortgage deposit that you are able to put down. There is also a maximum age limit on most buy-to-let mortgages and you won’t be approved if you are going to be over the age of 70 by the time the loan is paid off.

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    Megan Stoyles (CeMAP)
    Megan Stoyles (CeMAP)

    Megan CeMAP is a dedicated Mortgage & Protection Adviser at YesCanDo Money. With her fresh and approachable style, she specialises in guiding clients through the mortgage process, whether they're first-time buyers, home movers, or interested in buy-to-let. Megan's passion for helping people find their dream homes and ensuring their financial security sets her apart.

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