If you’re looking to buy a property, then these days you are looking at needing quite a hefty deposit mortgage deposit. The minimum deposit for a property is usually 10% of its value, but having a 15% deposit or more can really help when it comes to securing the best mortgage rates.
Since the Covid-19 pandemic kicked off nearly 2 years ago, more lenders are asking for at least a 15% deposit, most likely because they are worried about the economic uncertainty that may cause house prices to fall at some point.
Finding a 10% house deposit can rightly seem impossible for many people, but a new government-backed mortgage scheme to help people with 5% deposits get on the housing ladder was launched last April (2021).
So what is the ideal deposit to have?
The simple answer to the above is as large as possible!
Saving for a bigger deposit for your new home makes you a safer investment and therefore better prospect for a mortgage lender. This is because, even if house prices fall by 10%, the mortgage lender should be able to claw back its money from the sale of the property. By having a bigger house deposit, you will therefore be offered lower mortgage interest rates which is better for you (especially with the general cost of living rising).
The ratio between the deposit and the mortgage is known as the loan to value (LTV) ratio. For example, if you have a 10% deposit, you will need 90% from the lender, or a 90% LTV mortgage. The higher the LTV, the higher the interest rate.
A good mortgage broker will be able to advise on mortgages available to you and the subsequent deposit needed.