At One 77, the two most frequent questions we are asked are; ‘How much deposit do I need?’ and ‘Can I get a mortgage without a deposit?’
The chances of obtaining a mortgage without a deposit are sadly slim to none. To avoid disappointment we would always suggest that those looking to obtain a mortgage save at least 5% of the average price of the properties they are interested in. This is not to say that the 5% will get you the mortgage you need, but it will give you a better starting position to work from and opens the door to potentially being eligible for Help to Buy.
The question of how large a deposit you will need is an ambiguous one, and one that can generally only be answered by taking into account a number of factors that we discover during what we call a ‘fact find’.
The fact find looks in detail at your incoming and outgoings as well as elements such as your credit rating, employment status and financial history. These factors combined can determine the success or failure of any mortgage application. However, let us look more closely at the amount you may need for the deposit in itself.
Lenders do not state a general amount they require for the deposit, it is more often the case that the size of it will play a larger role in both how much you wish to borrow and how high or low you would like the interest rate on your mortgage to be. As a rule of thumb, the larger the deposit you can put down, the cheaper your mortgage will be – both in overall capital size and in monthly repayments.
How much could I borrow?
Unsurprisingly, given what we have already discussed, this will generally depend on the amount of deposit you have – amongst the above factors we listed in the fact find.
All lenders require the information from the fact find in order to determine whether the mortgage amount you are looking to borrow is both affordable to yourself and is as low risk against their lending criteria as possible. This will mean they will want to ensure that your monthly income (salary, additional income sources etc) in sufficient compared against any other existing credit commitments and your average monthly outgoings (food, transport, entertainment, utilities, childcare/education costs etc). The excess/disposable amount left will then determine roughly how much you can afford and therefore how much you are likely to be able to borrow. It is also worth noting that any bad credit history (missed or defaulted payments, CCJs, payday loan applications etc) will also affect your likelihood of obtaining a mortgage – regardless of your present situation.
What is the ‘Loan to Value’?
The Loan to Value (LTV) is the difference between the size of the deposit you have available and the amount of mortgage you wish to borrow. Sometimes mortgage lenders will specifically advertise their products by the size of their LTV. As an example a mortgage product of 90% LTV will allow you to borrow £90,000 with a £10,000 deposit on a £100,000 property. Therefore by this measure, the more of a deposit you are able to acquire to put against the mortgage the lower the LTV, and therefore the lower the payments and the cheaper the cost will be – allowing you to either make a smaller monthly repayment or pay the mortgage off over a shorter period of time depending on how much you can afford.
I cannot get as much deposit as I would like?
In 2013 the government introduced the Help to Buy scheme to assist borrowers, especially first time buyers and those with smaller deposits or equity to re-invest, to either buy their first property or move up the property ladder.
The Help to Buy Equity loan scheme allows borrowers to put down only a deposit of 5%, meaning they can then borrow up to 20% of the cost when applying for a new build home. In essence this means that you will be able to apply for a mortgage product with a 75% LTV as opposed to a 95% one – again making the overall burden of the repayments lighter and making the housing market more accessible and affordable to those it had maybe rejected in the past.
So What Do I Do Next?
The mortgage market can often seem like a maze at the best of times, but as we have briefly looked at above, there are generally always options open to most borrowers. More often than not it is knowing where to find them, and the criteria to access them. As a fee free mortgage brokerage One 77 are on hand 7 days a week to help you navigate through the confusion and find you the best deal we can. We have access to the whole UK mortgage market – including having access to many specialist products not available on the high street. But most importantly, we will never charge you a fee for the services we provide, allowing you to put the funds charged by other brokers and lenders straight back into your deposit. We can also provide you with a mortgage recommendation within 2 hours of making contact with us.
Sound good? Give us a call today on 01249 474952 and find out how you can get moving on the property ladder.
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