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How Much Money Do First-Time Home Buyers Need for a Deposit in the UK?

Housing-Market / UK Housing Aug 03, 2017 - 02:08 PM GMT

By: Boris_Dzhingarov

Housing-Market

The dream of buying a home one day is something that many people share. For some, realising this dream can be a long journey filled with questions, apprehension, and confusion. Of course, one of the biggest questions people have is how much of a deposit they need to save in order to buy a house in the UK? This one simple question helps to determine if it’s possible to even purchase a home, and when it may actually happen.



So how much money is needed? Let’s discuss.

What is a Deposit?

If it's your first time purchasing a home, then it's important you get a clear understanding of all the terms and steps involved in the process. The deposit is something that will be discussed and refers to the cash that you will be putting up-front. This money goes to the seller of the home. Typically, the deposit is referred to as a percentage of the purchase price. For example, you may put down 5%, which means you are putting downing 5% of the purchase price of the home.

The deposit can come from a variety of sources, which include money from the sale of a previous home, your own personal savings, or a grant/gift from someone.

The Bare Minimum

Here in the UK, there is a minimum amount of money that is required for the deposit. It is necessary that you come up with 5% of the property's value to be approved for a mortgage. The remaining 95% would be funded by the financial institution you are using. Of course, this shouldn’t stop a person from saving more than 5%.

When you put down a larger deposit, you will, in fact, need a small mortgage. What this means is that you’ll be paying back less money and your mortgage payments will be smaller. This can make your month-to-month expenses much easier to handle. Stats calculated in 2015 showed that the average first-time buyer provided a 17% deposit on their first home, which is obviously much greater than the required minimum 5%.

Providing a larger deposit also means you are eligible for better mortgage deals and interest rates.

Getting Professional Advice and Help

Even if you've been successful in saving your deposit, understanding mortgage rates, terms, amortization schedules, and more, can be very daunting. This is exactly why it's a good idea for first-time home buyers to work with a mortgage broker. In fact, you can even find digital versions of mortgage brokers that provide services for free. A mortgage broker works by comparing the terms and rates by various lending institutes so you can find the best one for your needs and budget.

Making the Dream a Reality

So much of the house-buying process involves being prepared and knowing what comes next, including being aware of the kind of deposit that will be required on your part. Check out the government’s Help to Buy ISA if you need a savings plan to start building a deposit.

By Boris Dzhingarov

© 2017 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: This is a paid advertorial. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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