How Much Deposit Do You Need To Buy A House UK?

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Saving for a deposit to buy a house is difficult. It can feel never-ending, with many of us working overtime and cutting back on expenses wherever we can. But getting onto the property ladder, either for the first time or you’re moving after a long time, It doesn’t always have to be a struggle. There are lots of options and schemes to help you. You just need to understand how much deposit you need to buy a house in the UK.

How Much Deposit Do You Need?

The average home buyer in the UK has a deposit for a house of around 15%. However, the deposit you need to buy your house is dependant on:

  • The value of your property
  • Your combined income
  • Existing bills or loan payments
  • Length of mortgage

Typically the more existing payment commitments you have or the higher the value of the property you are buying is, the bigger deposit you will need. However, the larger your combined income or the longer your mortgage term is, the smaller the deposit is that you will need.

However, if you can afford to put down a bigger deposit than you need to, you will lower your monthly mortgage repayments. This will help your affordability long term.

How Can The Government Help Me Buy A House?

The UK government has several mortgage schemes in place to help anyone buy a property. They help both first-time buyers and current homeowners afford a mortgage.

95% Mortgages

After the impact COVID-19 had on the housing market, the government introduced a new Mortgage Guarantee Scheme. Effective from the 1st of April 2021, buyers are now able to apply for a 95% mortgage.

The conditions of this scheme mean that it is not applicable for second homes or buy to lets, and must be a residential mortgage.

So for first-time home buyers, this scheme means that buyers will only have to provide a 5% deposit to be able to buy a property with the purchase value of £600,000 or less. This makes it easier for people in the UK to become homeowners.

90% Mortgages

For buyers who aren’t eligible for the 95% mortgage scheme, there is a 90% mortgage scheme.

This is the more traditional option, providing at least a 10% deposit. So for example, on a £200k house, you would need to provide a £20k deposit.

Again, this scheme is only available to first-buyers who are purchasing a residential property.

Help To Buy Schemes

The UK government also has three help-to-buy schemes running to support first-time buyers who are saving for their first mortgage. There are three support schemes:

Equity Loans are loans from the UK government. As a first-time buyer, you can borrow between 5-20% from the government to help you purchase a newly built home. However, there are price caps by county on the maximum property value.

Shared Ownership allows you to buy a share of your home, which is helpful when you can’t afford a mortgage on 100% of your home. So you can between 25% and 75% of a property home and pay rent on the rest.

Help to Buy ISA boosts your savings for a deposit by 25%. The government will give you a 25% bonus of up to £3,000 in your help to buy ISA account.

Find Out How Much You Can Borrow For Your Mortgage

If you’re unsure how much deposit you need to buy a house or how much you can borrow for your mortgage, you can use a mortgage calculator but we suggest you always speak to an advisor as experience shows calculators are rarely accurate. 

Using a mortgage calculator can help you to understand how much deposit you need to save and how much you can borrow based on your current situation. It will consider:

  • Your income
  • Property purchase price

How To Improve Your Mortgage Chances

While it may seem that it’s a dead cert that you’ll be able to purchase a property after you’ve gathered your 10% deposit, it can sometimes still be a challenge to be accepted for a mortgage. Factors such as your employment and/or credit history can sometimes be a hurdle that you’ll need to overcome.

Current Address Proof

Start by getting on the electoral register at your current address. This will help lenders to see that you’re definitely residing at the address that you’ve provided them with and is vital in regards to lenders being able to check your identity.

Credit History Checks

Check your credit history! It’s more common than you think for people to find errors on their credit report.

Try signing up for a free credit report (Clearscore and Credit Karma or a free trial with checkmyfile which is great and easy to read) this will give you the chance to see whether all of your credit details are correct. Using a credit report tool will also help you to see where you could reduce any debt that you have, and helps to make it more obvious where your credit is being utilised and how much is being utilised.

Deposit Amount

As much as it can seem like an endless cycle of saving money and reducing expenditure to be able to provide a 10% deposit, it may actually be beneficial to increase the amount of deposit that you have, as this can often help your mortgage application. Even adding an additional £2k on top of your existing deposit could improve your mortgage chances and could put you in a stronger position.

Check For Errors

Prepare well before applying for your mortgage; take time to ensure that all paperwork is filled out correctly and that all application steps are followed to the letter, as you may have to re-submit your entire mortgage application even if there’s just one simple error on any paperwork. Finally, don’t apply for more than one mortgage at a time, as multiple searches on your credit file by lenders will only negatively impact it; if you are turned down for a loan or mortgage, leave at least 3 months before reapplying to try and improve your chances of being accepted.

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