Watch this video on my YouTube channel and read below for the full transcript…
Hello, and welcome to The Mortgage Mum today I’m going to be talking to you about how much deposit you need to be able to purchase a property…
So this is part of our first time buyer video series, to be able to explain to you all of the things you need to know to be able to buy property and demystify the mortgage market. So deposits, how much do you need to be able to buy a property? Well, this time last year, the answer would have been very, very different because this time last year, 95% loan to value mortgages were not on the market. So you couldn’t buy a property with 5% deposit unless you were taken advantage of one of the schemes. When I’m pleased to say that this year, that is not the case. So you can buy a property with as little as 5% deposit, and it doesn’t have to be part of the mortgage guarantee scheme or the help to buy scheme.
You can buy using a standard traditional residential mortgage with a 5% deposit. Now it goes without saying, it’s important to tell you that the more deposit you put down, the better your rate is going to be. So the highest rates on the market will be at 95% loan to value. And for those of you who don’t know what I mean, when I say 95%, loan to value, loan to value refers to the loan, the mortgage, the value of the property, and the difference between those two. So if you’re putting down a 5% deposit, 100 minus five is 95, 95% loan to value is what we call it in the broker world. So in case that ever kind of confuses you, that’s what it is and the better your loan to value, the better your rate is going to be. Now, typically they go and 5% intervals before the rate changes.
So for example, you put down an 8% deposit. You’re not going to get a better rate until you hit the 10% mark. Likewise, if you put down 12% deposit, the rate will only decrease again, once it hits that 15%, which is their equivalent of 85% loan to value. So if you’re ever looking at lenders websites or Googling, that’s what that means for those of you who don’t know. So ideally 10% is better because you’re going to get better rates and there’s more lenders with 10% deposit, but you can technically buy a property with 5% deposit. Now, if you’re really struggling to get a deposit, but you know, you can afford a mortgage. And there’s so many of you out there that is a view who are renting. For example, know that they probably pay more rent than their mortgage is going to be, but they get trapped in a situation where you can afford the mortgage, but you can’t save to your deposit and you don’t have the option of moving in with your parents or not having to pay rent for a little while.
And that’s so many of you in that position, there are schemes out there. 100% loan to value mortgages are a thing of the past, sadly, that’s how I got onto the property market. So I really do simplifies with those of you who are in the position of not being able to save. What I would say is even saving a pound is something, and it does something to your mindset. So do save, even if it’s a little bit. And even if you think there is literally no point because I’m never going to reach that milestone, I might as well buy something else on my credit card. It’s the mindset shift that comes with saving a bit of money each month. So do you think about that, but they’re asking was out there that will allow you to buy a property. If you have people around you that can potentially support.
And I’m talking about the family schemes that are out there, say the one I always refer to is the Barclays scheme and what that enables family members to do that maybe don’t want to gift you a deposit because it deposits a lot of money but do want to be able to help. Then they can take advantage of the family springboard. And what that means is they will put their savings into a savings account with Barclays, that’s linked to your mortgage and they have to put in 10% of the equivalent of what a 10% deposit would be in that savings account. They can’t touch it for five years, but they will get their money back with interest. As long as you keep up your monthly repayments. And there are some terms and conditions around that, but that is it in a nutshell. So that means you can buy a property, your family member, or somebody that’s happy to support that mortgage puts it into helpful start account.
They get their money back in five years of interest. And in five years time, you still own the property and the property is owned by you. So that is a really great way of creating that no need for a deposit. And there’s a few similar schemes from other lenders as well, but that’s the one I always refer to. So if you’re saving for a deposit, my message to you is keep saving. I know it’s really hard. I always want to just give you a round of applause when you’re first-time buyer, that comes to us with a deposit saved, because it’s an amazing, amazing achievement. And the market is doing what it can to get you on the property ladder with 5% deposit. So keep saving, keep going. If you’ve got any questions, let me know and look out for these videos, put your notifications on so that you see these places when they pop up and then subscribe. If you haven’t already. And that way, you’re going to get to know everything you need to know before you get on the property ladder. And you’re going to be equipped with knowledge, which is the best thing that you can have gains. Thanks so much for listening.