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.
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.
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.
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.
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.
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.
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.
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.
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.
Date Last Edited: January 20, 2023