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The Best Ways to Come Up with a Deposit for a Mortgage

8 February 2018 No Comment

For many, coming up with the deposit for a mortgage is the biggest hurdle. It’s difficult enough to save a bit of our monthly income, so how much more when saving for a deposit? For instance, if you are eyeing a home with a value of £150,000, a 5% deposit is already £7,500. A 10% deposit will amount to £15,000, and so on. And you may already know that having a higher deposit can give you a better chance when it comes to mortgage deals, but you still have to get through that first step: having enough money for that crucial deposit. Here, then, are the best ways to come up with a deposit for a mortgage.

Save, save, save

Buying a piece of property and making sure the mortgage is paid off is perhaps the biggest lifetime expense you will ever have, so it’s something that needs to be carefully assessed. And whilst having that dream home may be your goal, rushing into a mortgage with only a small deposit can end up being a burden for you in the long term. One piece of mortgage advice: if you are not in such a hurry to own a piece of property, save as much as you can first. Know the location or area of the property you want, so you have a better idea how much to save and what kind of mortgage you can get.

You can also find other ways of increasing your funds, such as investing in bonds which can provide you with a fixed return or invest in stocks. This is riskier, but you can have greater returns. You can also look for part-time employment and save your extra income.

Get help

If you’re having trouble coming up with a decent deposit amount, you can seek help from the government. The government is doing its own bit to help prospective property owners acquire property. One scheme is the Help to Buy programme, where a buyer can get a loan for as much as 20% of a property’s value, without interest, as long as they have an additional 5% of the deposit. This loan will be free of interest for 5 years, and afterward, a rate of interest of only 1.75% will be added, which then increases each year.

Another scheme is the shared ownership scheme, where you purchase a share or portion of a property and then pay additional rent to a specific housing association. With this, you could either acquire a mortgage or give a deposit in cash.

You have other options when it comes to coming up with the deposit, and there’s good news as well: some lenders may be willing to offer competitive deals for 5% deposits; they are out there, and all you have to do is look around.

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