At Mortgage Hunters we have been providing mortgage advice to clients since 2006.
Question – how much deposit do I need to purchase a home?
Answer – Many lenders are now a little more relaxed and will offer buyers with smaller deposits mortgages.
The usual criteria applies
- Your general credit profile
- Job History
- Affordability
- Other commitments
As a rule of thumb, the larger your deposit the more relaxed the Lender may be to your circumstances. This is because the risk to the lender is reduced.
Question – So what are my options?
Answer – It is possible to get a mortgage with a 5% deposit. You will need to have additional funds available for any stamp duty and of course solicitors/legal costs.
To try to offset the risk to the Lender they will charge a higher interest rate for high loan to value mortgages.
They have rate bands which typically reflect the percentage of the property value being borrowed ie 60% – 70% – 75% – 80% etc. These can differ considerably from lender to lender. So its worth getting professional advice to identify the best option for you.
Question – Do I have any other options?
Answer – Yes if you are looking to buy a new build house or flat, you may be eligible for the Government help to buy scheme, builders equity share, or shared ownership.
For example; Help to buy enables you to put down say a 5% deposit and borrow 20% on the ‘HTB’ scheme.
The advantages are that you do not make any repayments for the first 5 years. After that if you still have the help to buy mortgage you will pay 3% of the amount borrowed each year. In addition as the mortgage required is only 75% of the purchase price you may get a lower interest rate than you would if you borrowed the 95% on mortgage.
The disadvantage is that the ‘HTB’ lender owns 20% of the property and when you sell the property will want their share of the property value at that time. This means that if you have say made a gain of £100,000 the ‘HTB’ lender will be entitled to £20,000 of that gain. Also you can only use ‘HTB’ on new build properties.
If you would like general mortgage advice, find out how much you could borrow, or discuss Help To Buy, Shared Equity or Shared Ownership please call us on 01438 359300 or email us at info@mortgagehunters.co.uk