How Much Deposit Do I Need to Buy a House in London?

Deposit Mortgage Advice in London

When buying a property, you will need to put down a deposit. This deposit amount can change depending on the property value, your credit score and your personal and financial situation.

Your lender will need to know that you are a reliable applicant, therefore, you will have to pass certain affordability assessments before your application is accepted.

A Mortgage Broker in London like us will help you prepare your mortgage application and make sure that you look the best that you can do in front of your lender.

Why do I need a deposit for a mortgage in London?

Pre-credit crunch era, you wouldn’t need a deposit to get a mortgage, in some cases, you’d be able to borrow 100% of the property’s price. Some lenders were even offering more than the actual value of the property, for example, you may get £125,000 for a £100,000 property. You can see where it all went wrong.

You are now required to pass affordability assessments before being able to borrow any amount of money this large. Lenders don’t want to be lending to someone who cannot afford to pay them back. The last thing that they want is to repossess your property.

Usually, you will need a 5% deposit minimum. If you cannot make this amount, you may need to ask for help through a gifted deposit or continue saving until you reach the required amount.

Can the government pay the deposit for me?

The government cannot pay for your deposit, however, there are schemes available that can help you increase your deposit amount.

For example, the Help to Buy Equity Loan scheme, allows you to make up a 25% total deposit. You will have to meet the 5% minimum deposit, then the government will top it up to make up a total of 25%. This scheme only applies to new-builds and you have to be a First Time Buyer in London.

The Equity Loan that the government lend you is interest-free for the first 5 years. Afterwards, you’ll start receiving interest on the amount left.

Is a 5% deposit enough?

Most high street lenders will ask for a 5% minimum deposit. If you’ve got bad credit, you may be asked to put down a higher percentage, e.g., 10-15%.

If you’ve got your 5% deposit and are ready to make an offer on a property, you will need to arrange a mortgage agreement in principle so that the estate agents are aware that you’ve been accepted by your lender. As an experienced Mortgage Broker in London, we are able to prepare you a mortgage agreement in principle within 24-hours of your mortgage appointment.

How much do I need to put down if I have a poor credit history?

Having poor credit may mean that you have to put down a higher deposit. Some lenders may ask for 10-15% of the property’s value. They need to make sure that you are a reliable applicant that can afford their mortgage payments before lending to you.

There are different ways to improve your credit score. If you try to implement these changes and show your lender that you’re trying to improve your finances, it will reflect better on your application.

How much deposit do I need for a Buy to Let property?

If you are looking at taking out a Buy to Let in London, you are going to need a minimum deposit of 25%.

When it comes to taking out your second, third or even fourth mortgage, you’re going to need a higher deposit, no matter what the reason is for doing so. Affording multiple sets of mortgage payments can be difficult, and that’s why lenders ask for more evidence so that they’re certain it’s within your limits.

Can I take out a loan for the deposit?

Despite this being possible, not all lenders will allow it. It’s rare to find a lender that is okay with this as you would have a 100% mortgage.

This would result in you having two sets of loan repayments going out, which could be difficult to manage.

Can someone gift me a deposit?

Yes, you can receive the deposit as a gift. Typically, buyers receive a gifted deposit from their parents or family members when they’re struggling to make up the minimum 5% deposit.

This must strictly be a gift and not a loan. The party gifting the deposit must confirm that this is the case.

As a Mortgage Broker in London, we see situations where the gifted deposit boosts the applicant’s deposit up to around 7 or 8%. This can make you appear more reliable and have a positive impact on your application.

Are there any circumstances where I don’t need a deposit?

There are some of the main situations where you may not need a deposit for your mortgage:

Please note that the above information and guidance is for reference purposes only and is not to be viewed as personal financial or mortgage advice.

Mortgage Advice in London

Our 10 Step Home Buying Guide for First Time Buyers in London

We tend to find a lot of customers asking us about the process of being a first time buyer in London when buying a home. Below we put together an extensive list of the 10 steps that you will go through during the mortgage process. We want to make sure that you are in the best possible position to get you prepared for your mortgage journey.

Here are the 10 steps to the home buying process and to obtaining a mortgage;

Step One: Get in Touch for Your Free Mortgage Appointment

Now, it’s time to purchase a home and take out a first time buyer mortgage. Getting onto the property ladder will be one of the biggest financial decisions you’ll ever make. The entire experience can be a bit daunting, especially when you have had no experience before.

With the help of a dedicated Mortgage Broker in London, we’ll be able to help you along the process. We aim to take the stress away from you and work hard to ensure you come out with a suitable mortgage deal.

To speak with one of our qualified Mortgage Advisors in London, book your free mortgage appointment today. They’ll take a few key details and look at what you’re hoping to achieve, before starting your process.

Step Two: Mortgage Affordability Assessment

During your free mortgage consultation, we’ll be able to run through a Mortgage Affordability Assessment. Our Mortgage Advisors in London will go through your monthly income and regular expenditures, to determine whether or not you can afford the monthly repayments of the mortgage amount you’re looking to borrow.

The reason why doing an affordability assessment is essential before putting your application forward, with a lender, is because they need to be confident that you can afford your repayments. By avoiding the risk of arrears and potential future repossession, something the lender will desperately want to avoid.

A Mortgage Affordability Assessment is something the lender will usually check themselves, so our initial check will help save the time of the lender, ourselves, and more importantly you, from an application that may be declined due to failing on affordability. 

Step Three: Obtaining a Mortgage Agreement in Principle

During your consultation, you will be able to obtain a Mortgage Agreement in Principle. Which can help give First-Time Buyers in London a boost when making an offer on a property.

You may have seen this under a few different, but similar names. These include ‘Decision in Principle’, ‘Mortgage in Principle’, as well as the abbreviations ‘DIP’ & ‘AIP’. There is no difference between these, other than the name.

The purpose of a Mortgage Agreement in Principle is to document that you have passed a lender’s initial credit scoring system, either via a hard credit search or a soft search.

However, this does not guarantee you will be accepted on a mortgage but is a necessary document to have. Having an A.I.P. will show the seller of a property that you are serious buyer, possibly creating a possibility for price negotiations.

An A.I.P. can last anywhere between 30-90 days, and can easily be renewed once expired. Our Mortgage Advisors in London can usually get one of these turned around for you within 24 hours of your initial appointment.

Step Four: Finding the Right Solicitor

Following your Agreement in Principle, you will need to find yourself a Conveyancing Solicitor to help you with the legal proceedings of the homebuying process.

Your Conveyancing Solicitor will be able to handle; Contracts, provide any legal advice, conduct local council / authority searches, deal with the Land registry, and transfer the funds you have acquired to pay for your property. As you can see, you must make sure you can choose carefully.

Also make sure to note that Licensed Conveyancers are property specialists who can’t deal with complicated legal issues, whereas more general Solicitors offer a full range of services so can often seem more expensive.

Sadly, whilst we do not offer these services ourselves in-house, our dedicated Mortgage Advisors in London can refer you out to someone to is.

Step Five: Making an Offer on a Property

After speaking to a Mortgage Broker in London, passed the Mortgage Affordability Assessment, obtained an Agreement in Principle, and found yourself a Conveyancing Solicitor to handle the legal side of things. You’re now halfway through the process, next it’s time to make an offer on the property you wish to purchase.

With an Agreement in Principle, you will be in a much better place to negotiate on price. With the seller knowing that you have an AIP they may be more likely to sell to you than someone who is willing to pay the asking price but is unprepared. But this isn’t a guarantee.

Worst-case scenario the seller rejects your offer, you can work out a more reasonable offer or find yourself another property. If your offer got accepted, get back in touch with your Mortgage Advisor in London, and they will continue with your mortgage journey.

Sixth Six: Submit Your Documents  

Make sure to submit the required documents. Your lender will need you to provide various documentation, including the amount you earn from your job, where you live, and how you conduct your finances, are very important to the lender.

If you’re obtaining a joint mortgage, they will require this documentation from both candidates involved. The several types of documents you will need to submit, include; 

As for self employed applicants in London you will need to provide; 

Step Seven: We’ll Progress Your Mortgage Application  

With your mortgage agreed in principle, and your offer accepted, your Mortgage Advisors in London can now proceed to submit your full mortgage application. Having everything checked and ready by your Mortgage Advisor in London and Administrators, we are ready to submit an application to the lender for a mortgage.

Your Mortgage Advisor in London will send off all the gathered documentation for this, and then wait for them to respond with whether or not the application has been accepted or declined. Sadly, there is no given time frame, however, our Mortgage Administration team will be able to chase the lender for an answer on this for you.

Step Eight: Property Valuation / Survey  

During the process, the lender will require a valuation survey of your property to be undertaken. These are usually carried out by the lender’s choice. The valuation is to help understand the true value of the property.

If you’re paying above its actual market value, the lender may be less willing to accept your offer. Because they’ll be out of pocket and unable to make back the full borrowed amount. This terminology is also known as a ‘Down Valuation’.

Your Mortgage Advisor in London will be able to help you choose the right survey for you. Each surveyor comes with a different price. Some will just want to check the property’s worth, whereas some will also provide information on any structural concerns as well as possible repairs.

Step Nine: Receiving Your Mortgage Offer  

Once your lender has checked over your case and assessed all the evidencing documentation, they will present you with your Mortgage Offer.

Our team of Mortgage Advisors and Administrators in London will make final checks to make sure nothing got missed. Next, it’s down to your Conveyancing Solicitor to take your purchase through to completion.  

Step Ten: Completing The Process 

Now for the exciting part, you’ve now officially went from a first time buyer in London to a homeowner. By now, we hope you are happy and ready to begin your new life, in your new home.

Just have to wait for the key and moving-in date. We hope you found our service beneficial and received a fast and friendly Mortgage Advice service in London. If you have chosen a fixed-rate mortgage, at the end of your term, we will be in touch to help out once again with your remortgage in London

Gifted Deposits FAQ’s | Mortgage Advice in London

Gifted Deposit Explained | Mortgage Advice in London

During our time as an open and honest Mortgage Broker in London, we understand that sometimes scraping together a deposit, is one of the biggest hurdles for a first time buyer in London to get onto the property ladder.

We tend to find, parents, grandparents and on rare occasions, even friends who want to help the ones they care for get onto the property ladder. They’ll provide either a portion or the entire amount of the deposit to put down on a property and obtain a mortgage. Find out what gifted deposits are and how they work.

What is a gifted deposit?

A gifted deposit is money given by parents, grandparents, or friends to a homebuyer to use towards your deposit to put down on a property and obtain a mortgage. It can either be a portion or the entire amount.

The money given isn’t a loan and gifted deposits are given to you with an understanding that the money doesn’t need to be repaid.

How can gifted deposits help out? 

Gifted deposits are helpful to first time buyers in London. Mainly those who are financially capable of covering their mortgage repayments, but struggling to save up for the initial deposit.

We tend to find, that these situations happen quote often. Perhaps they’ll have larger outgoings, such as rental payments, home energy bills, and essentials. That there isn’t anything else left to put into savings for a deposit.

By receiving a gifted deposit, this will allow you to gain access to much better rates of interest during your mortgage process, especially if that gift is above the minimum 5-10% deposit requirement.

Who can gift the deposit? 

As we’ve said, it’s mainly parents or carers who can gift you the deposit. This is often discussed online using the terminology “Bank of Mum & Dad”, don’t let the name throw you off this can include adopted parents too.

Sometimes other family members may also be able to help out with a gifted deposit. Though this entirely depends on the mortgage lender that you end up with. That’s why it’s worth getting in touch to speak to a Mortgage Advisor in London beforehand.

Do your parents know you need help? 

We often hear back from customers who have no idea their parents can help with their mortgage! This is why we aim to inform and encounter more people to ask for some extra help, so more people can get a chance to get onto the property ladder.

The majority of parents are more than happy to help their children to find a home of their own, comfortably living as opposed to struggling whilst living in a rental property.
 
In some areas taking out a mortgage may save you more money per month than you would get from renting, of course, this depends on several factors, but in some circumstances, it can happen.

Gifted deposits can come from inheritance, although parents can sometimes gift it much earlier if they have enough money saved or have released equity from their own home.

Gifted Deposit vs Loans 

Some mortgage lenders out there won’t accept loans as a means of paying off your deposit. It will be often related to the lender not being so sure if you can afford to pay back both simultaneously.

Is there a maximum or minimum gifted amount? 

There are no limits to the amount that can be gifted to a home buyer, it’s worth remembering that some lenders will want you to have a minimum of 5% from your own savings.

The more you can afford to put down, perhaps combining savings and gifts, you’ll open yourself up to better deals. 

Who could benefit from a gifted deposit? 

We tend to find, that it’s normally First Time Buyers and home movers in London who will benefit the most from the gifted deposit.

A gifted deposit can be used to cover the initial 5% deposit for the Help to Buy Equity Loan Scheme. However, this will depend on the lender.

What proof is required? 

Your donor will need to sign a gifted deposit form stating that it is not a loan and is in fact a gift. Additional proof such as ID, address, and bank statements will be required.

Our Mortgage Advice Service in London 

As a fast and friendly mortgage broker in London, we aim to provide our customers with the highest level of customer service, through a fast and friendly Mortgage Advice in London service.

No matter your mortgage situation. When someone gets in touch with us for Mortgage Advice in London, we will consider all cases, no matter how complex, and try our best to find a resolution.

Book Your Free Mortgage Appointment 

A trusted and experienced Mortgage Broker in London is available seven days a week, from early on until late. Our Mortgage Advisors in London will be ready and waiting to offer their support at all times.

Book your free mortgage appointment today with an expert mortgage advisor in London and we’ll see how we are able to help you on your mortgage journey. 

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