Taking the plunge and buying your first home can be a nerve-wracking experience, especially when it comes to making financial decisions like choosing a mortgage.
Before you start house hunting, it’s crucial to understand how mortgage deposits work, including how much you’ll need to save and the rules around gifted deposits. The experts at Which? have provided some guidance on how much you’ll need for a deposit.
Which? explains that mortgages are typically available at up to 95% loan-to-value (LTV), meaning you could potentially step onto the property ladder with a deposit of just 5% of the purchase price, while a mortgage would cover the remaining 95%, reports Wales Online.
Here’s a breakdown of how much cash you’d need to put down on a £200,000 property, based on different deposit sizes:.
To figure out how much you might need to save for your mortgage deposit, consider typical property prices and monthly repayment costs. It’s also worth looking at property prices in your local area – you can get a rough idea from property portals like Rightmove and Zoopla, or by chatting to local estate agents.
Keep in mind, though, that the figures listed on portals and agent websites are asking prices, so they might be slightly higher than what the properties are actually worth. For more accurate information, you can check how much homes in the area have sold for using the Land Registry’s price paid tool.
Every monthly mortgage payment will comprise of interest as well as a portion of the loan itself – and the larger the deposit, the smaller the loan and the less interest you’ll have to pay.
You should also consider aspects such as mortgage fees, early repayment charges, and the duration over which you want to repay the loan (the mortgage term). To calculate how much a mortgage could set you back each month, you can utilise the Which? mortgage repayment calculator here.