Buying your home is one of the biggest financial considerations most of us will make during our life and for many it will seem quite a daunting prospect. Perhaps the biggest hurdle you have to overcome is getting a suitable deposit together. So, just how much do you need to have in place before you start to look at the housing market?
100% mortgages are still available but in today's market they require a Guarantor who will be able to take over payments in the event of the Mortgagor failing in their responsibility. This is not a straightforward option as it does require that all applicants and guarantors have to meet strict financial underwriting requirements.
The minimum deposit that some lenders will accept is 5% of the property value, on the proviso of course that you meet all their affordability criteria and meet all their other basic requirements. Lenders would expect anyone applying for a 95% mortgage to have an exemplary credit profile, any blip however minor would almost certainly preclude you. 95% mortgages expose the lender to a greater level of risk and as such the rates you can expect to pay tend to be significantly higher than if you had saved a deposit of 10% of the property value.
Putting a deposit of 10% or more down, will immediately open up most of the High Street lenders to you. Rates will start to improve dramatically and the occasional minor impairment on your credit file will not affect you so badly. According to a survey in 2015 by Which? National Property Survey, the average deposit saved by first time buyers was 17% of the property value!
The very best rates though tend to fall into place for those who have a 40% deposit to put into place...usually a domain reserved solely for those who are already well established on the housing ladder.
The golden rule though is "The bigger the deposit the better the rate!"
For instance : If you are looking to purchase a property valued at £200,000 you will need to have saved £10,000 to let you proceed with a 95% mortgage, but if you have saved £80,000 you would be looking at a 60% loan to value mortgage on that same £200,000 property.
Those extra months of saving before taking that first step on the housing ladder can make all the difference in the rate that you will pay.