Make your dream of a new home a reality this summer

A bit of summer sunshine brings out the best in a new development. This is a great time of year to move. Not only will your new home be more enjoyable at this time of year, but it will be easier to sell any existing property.

How much deposit should I put down when buying a new home?

One of the questions we are asked a lot is about the amount of deposit you should put down to buy your new home. There's no single answer to this - it all depends on your circumstances. It can be hard to save for a deposit. But if you do have some cash available, then we would always tend to advise people to put down the biggest deposit they can afford. There are several reasons for this:

Better choice of lenders

You may find that many mortgage lenders restrict their lending to certain types of borrower. Lots of banks and building societies are less keen on borrowers with small deposits - it's far riskier. So if you can put down say, 15% instead of 5% then you will have a much wider range of mortgate lender to choose from.

Better mortgage rates

It has always been the case that the best mortgage deals were available to people who had a low loan-to-value (LTV) - the amount of borrowing as a percentage of your home’s value. However, since the credit crunch this situation has been exacerbated. Rates for borrowers with a large deposit are now generally far superior to the deals available if you have a 5% or 10% deposit. If you can put down a larger deposit - even an additional 5% can help in many cases - you are likely to have a choice of more competitive fixed- and tracker-rate mortgage deals. 

Protection against negative equity

Should the unthinkable happen and property prices plummet, a high deposit helps you protect yourself against negative equity. If you have taken out a 95% mortgage, it only needs the value of your home to fall by a small amount for you to end up in a situation where you owe more than the property is worth. This makes it difficult for you to sell the property and leads to an increased risk that the lender won’t get their money back. If you can put down a larger deposit, you’ll reduce (although not eliminate) the risk of ending up in negative equity. 

If you have any queries about mortgages, then please contact our friendly mortgate adviser Joanne Moore.

enquire@mooreformoney.org.uk  or 01539 431419