Nowadays 100% mortgages, are only available to applicants who are currently renting and the criteria is very strict. Generally, anyone looking to buy a home will require at least a 5% deposit. Lenders all prefers lower Loan to Value (LTV) ratios in case you fall behind on your mortgage repayments.
This means in order to get a mortgage, first-time buyers will therefore need to save for a deposit and in this case, the bigger the better - more is most definitely more! Here are some tips for saving your deposit:
Of course, the most traditional way to save your deposit is to open a savings account. Choose wisely to make sure you get the maximum interest you can, and make sure there is no fee to withdraw your savings when you need them.
Take some time to think about how much per month you’re realistically able to save. Once you have decided, , set up a standing order for this amount to your savings account every month just after your payday. This is the best way to ensure that you actually save the amount you’re planning to.
Unfortunately, the Government's Help to Buy ISAs are no longer available, but you can get a Lifetime ISA instead which you can also use towards a deposit for a property. Anyone aged 18 to 39 can open a LISA, however, there are rules and restrictions to be aware of.
A LISA is essentially a savings account that you can put up to £4,000 a year into. The good thing about this ‘savings account’ is that the Government will add a 25% bonus to your savings, up to £1,000 per year. The money you save in a LISA can be used to help you buy your first home if the property costs under £450,000 and you’re planning to buy at least 12 months after you make your first payment into the account.
It is important to note that if you have a LISA and you need/want to take some of the money you have saved out of the account for reasons other than buying a property, you will have to pay a withdrawal charge of 25%.
If you are lucky enough to have someone who is willing, you do have the option to use money gifted from a family member or a friend to help you get a mortgage. Although different lenders have different rules on what is and isn’t acceptable, using a gifted deposit, is common and you will be able to secure a competitive mortgage product.
You do need to be careful with gifted money though as lenders often don’t like ‘loans’ for deposits, so you can’t borrow the money from a family member or friend, it will need to be a formal gift. Not declaring the exact source of your deposit could be seen as mortgage fraud, so you are best-seeking mortgage advice if you’re going to use gifted money.
If you have a family member who wants to help but cannot provide the funds as a gift, there are other options to consider. Some lenders allow family members to deposit funds in a savings account for a period of time, whilst they lend the borrower 100% of the property price. Something like the Family Springboard Mortgage from Barclays is a great example of this.
To discuss getting a mortgage in much more detail with a mortgage advisor in Maidenhead, book a free mortgage consultation with one of our qualified advisers today. Here at Mortgage Required, we have been providing mortgage advice to our customers for nearly two decades now and we will happily assist you in any way we can. We provide a whole of market mortgage service and you can rely on us to help you find the most suitable mortgage for you, regardless of your personal circumstances.
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