100-125% mortgages are long gone. Post-credit crunch, the country seems to be in a more stable, secure financial state and the property market is shining brighter than it did before. With more rules and regulations in place (see Credit Crunch for more), mortgage lenders now seem more confident in offering 95% mortgages.
Of course, it doesn’t just have to be 95%, it can be lower. The more deposit you have available at your disposal, the less you have to pay back, and you open yourself up to better rates of interest.
Deposits are also safety nets for mortgage lenders. At the end of the day, they need to be confident you can make your monthly repayments and if you don’t, they’re at a loss. With a substantial deposit, lenders are able to make some money back if things go wrong.
We are well aware that saving for a deposit is hard for a lot of people, making it difficult to leap from renting to becoming a first-time buyer in Manchester. This is especially the case if you are already renting or have a family, as money you would like to put aside for saving often has to go on other essentials.
Our mortgage advisors in Manchester regularly find themselves faced with many questions about deposits. Here we answer these as best we can, with a hope of providing you with a better understanding and elevating you to a better deal with a lender.
Absolutely! The more you put down, the lower your rate of interest will be. This allows for potentially lower mortgage repayments per month, as you will also be borrowing less for the property in question.
As mentioned above, with a higher deposit you are at a lower risk to the lender should things go wrong, so it really does work in your favour. Products are offered in bands of 5%, the most expensive being 95%.
Though a rare occurrence, it is not unheard of for this to be possible. This, however, is considered as an additional credit commitment. As such, the lender will grant you a smaller mortgage than the one you might have gotten if the deposit was not borrowed. The majority of lenders would rather this not be the case though, especially if you are borrowing 100% of the purchase price.
Yes, most lenders are completely fine with gifted deposits from members of your family and sometimes friends too. The one who is gifting must be able to confirm that it is in fact a gift and not to be paid back. For anti-money laundering sake, they may also need to provide identification and proof of funds.
Dubbed the “Bank of Mum & Dad” by many, gifted deposits are seen a saving grace for those struggling to get onto the property ladder and the market would be drastically different without it.
For Anti-Money Laundering purposes, all applicants need to evidence their funds by providing bank statements. Lenders like to take a look at how exactly money has been built up too. Recent large cash deposits in your account can be a big problem for lenders.
If you have done something like sell your car, you will need a receipt and proof that the amount it sold for matches the deposit made in your account. The longer these funds sit in your account, the easier this process gets. Providing an audit trail for your deposit source can often be the trickiest part of the application.
If you are selling a property to put money towards your deposit, then your proof of deposit will be the Memorandum of Sale provided by the estate agent. These are documents recording the buyers’ interest in your property and the terms of sale you have agreed on.
If you qualify for the government Help to Buy scheme, you are still only required to have a minimum 5% deposit. With 20% from the government equity loan, this will bump your deposit up to 25%, leading you to a lower rate mortgage. It is important to remember though, that this is a loan, not a gift and really needs paying back!
Depending on the situation, no. If the house has been genuinely discounted, then some lenders will accept the discount as deposit. For example, if the property is worth £100,000 and you have been offered it for £90,000, they will take the £10,000 discount as a deposit. This works well in conjunction with a Right to Buy from the local authority or private landlord.
Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.