How much deposit do you need to buy a house?
This is a question we're asked all the time - and it's not surprising, as saving for a deposit can be one of the biggest blockers stopping people from buying a house. So, when it comes to your house deposit, how much do you need?
Before we answer that, we should probably start with:
What is a house deposit?
A house deposit is a sum of money that you pay up front when you buy a house. By paying a deposit, you own a part of the house outright and you can then secure a mortgage to help you to pay for the rest.
How much deposit do you need to buy a house?
This will depend on a few factors. You'll normally need to pay a deposit of at least 5% of the price of the property you're buying. This means that the higher the price of the property, the more you'll need to save for your deposit.
Other factors in determining the deposit you'll need to pay, are the company you apply to for a mortgage and the type of mortgage you apply for.
Check out this handy deposit calculator, created by Which...
What's the average house deposit in the UK?
According to research from Halifax, "UK first-time buyers are putting down an average deposit of £32,841, with those in London stumping up an eye-watering £110,656".
Is it worth saving a bigger deposit?
Yes! There are several benefits to paying as much of a deposit as you can...
Cheaper monthly mortgage repayments
It stands to reason - the more you pay up front, the less you pay for your mortgage. When you factor in interest rates, you can end up saving a considerable amount by saving a considerable deposit...
Better mortgage rates
Speaking of interest rates... By paying a large house deposit, you're reducing the risk for your mortgage lender and so they may well offer you more favourable rates.
More likely to be accepted for a mortgage
Mortgage lenders decline applications when they view them as too risky. As we've seen, when you are able to pay a large deposit, that risk is reduced and so companies are more likely to accept.
Can you get a mortgage without a deposit?
0% Deposit mortgages are available, but will generally require a family member to act as guarantor. Be aware that these types of mortgages will generally come with higher interest rates. While it may feel tempting if you don't have a deposit saved yet, you'll probably end up paying much more with this option than if you take the time to save a deposit.
Can you get help with your house deposit?
There are various options available if you're struggling to save a deposit to buy a house. If you're a first time buyer you may want to consider the Government's Help to Buy; Equity Loan...
Help to Buy: Equity Loan
If you save 5% deposit, the government lends you up to 20% of the property’s value (or 40% in London). The loan is interest free for 5 years.
BB Mortgages are here to help too!
Here at BB Mortgages, we have years of experience in finding people the right mortgage for their specific circumstances. We offer free consultations so why not book one now and we can chat about what the best options are for you.
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