We have been in the mortgage business for a very long time now. We also know how hard it can be to get a mortgage. It used to be easy, prior to the credit crunch, lenders were handing out mortgages here and there. After the credit crunch, lenders became stricter and were only offering 100% and even 125% mortgages. After it was practically impossible to get a mortgage in 2007, the market eased out and returned to a relaxed state. Lenders turned back to 95% mortgages.
If you have a family or are living in rented accommodation, it can be quite hard trying to find the perfect first home that is affordable. We always get asked lots of questions regarding deposits and how much you will need. We frequently get asked these questions from First-Time Buyers in Durham:
Yes, putting down a deposit of more than 5% can massively increase your chances of getting accepted for a mortgage. Laying down a greater deposit could also lower the rate of interest that your lender offers you. By doing this, you are proving to the lender that you are financially stable. You are making yourself appear as trustworthy and they will know that you are not a risk. Lenders offer their products in brands of 5%, e.g, 95% mortgages are the most costly, followed on by 90%, 85%, etc.
Yes, you can, although, we don’t recommend it as lender tend to not like it. They see it as you can’t fully afford the 5% deposit and you need help to reach it. They will also take this new loan as one of your recurring monthly credit commitments. Therefore, you will get a smaller mortgage than you would’ve without the personal loan but you are basically borrowing two lots of money equating to the full 100% of the mortgage. This is why they can be put off by this.
Most lenders do yes. It is very unlikely that you will find a lender that will not accept a gifted deposit. As long as the gifted deposit is not a loan, then the lender should accept it. The family or friend who is gifting you the deposit must provide ID and information on where the funds have come from.
First-Time Buyers in Durham usually get on the property ladder this way, they receive a gifted deposit from a parent or a friend. They usually understand how hard it can be to meet that 5% so they help them get on the property ladder.
You will always need to prove to lenders where you have received money from and prove your monthly/yearly income and outgoings. Lenders need to make sure that you will be able to pay off your mortgage after putting down your deposit. The longer that you have been saving for a deposit, the more that it will benefit your application. Saving money shows the lender that you are good at managing your money.
If you have deposited a large amount of cash into your account recently, you will need to prove to the lender how you got this. For example, if you are selling a car, you will need to show them a receipt, prove how much you sold it for and show that this price matches your deposit into your bank.
You have to be careful when you are depositing large sums of cash at once as it could look suspicious on the lenders part. So make sure that you can prove where you have got it from. The longer that these sums have been in your account, the easier the whole process is.
The hardest part of the application can be proving the source of your deposits as sometimes they can be hard to get a hold of.
If you are selling a property, then your Estate Agent will give you a Memorandum of Sale to use as proof.
There is still a minimum 5% deposit if you qualify for the Help to Buy Equity Loan scheme. On this scheme, your deposit can be topped up to 25% which all depends on the loan you get through. This will give you a lower rate mortgage.
Remember that the loan that you borrow from the government will need to be paid off within 5 years. It’s not a gift of them, so if you fail to meet the 5-year deadline, then you will start to receive interest on the loan payments.
If you already know about the Help to Buy Equity Loan, this should make sense.