How to Save For a Mortgage in Durham

Saving for a mortgage deposit can be challenging in today’s economic climate. As experienced mortgage broker in Durham, we understand that first time buyers in Durham often feel overwhelmed by the homebuying process.

It’s crucial to ensure a good credit score, save enough for the deposit, and provide evidence of affordability.

In this article, we will explore valuable tips on saving for your mortgage deposit and important considerations to keep in mind before applying for a mortgage. Our goal is to provide you with the guidance and knowledge necessary to navigate the process with confidence.

Work Out How Much You Need to Save For Your Mortgage in Durham

To effectively save for a mortgage deposit, it’s important to assess your monthly disposable income. Begin by carefully evaluating your average monthly expenses to determine how much you can realistically allocate towards your savings.

This assessment will provide you with a clear understanding of the amount you can save each month. While the minimum deposit required is typically 5% of the property’s value, many first time buyers in Durham aim to save even more, aspiring for deposits of up to 20% of the property’s value.

There are several advantages to saving a larger deposit. Firstly, it results in lower monthly mortgage payments, making homeownership more affordable. Moreover, if you have bad credit, lenders may require a deposit of around 15-20% to mitigate risk.

It’s crucial to recognise that a larger deposit reduces the loan-to-value (LTV) ratio, which improves your standing with lenders. It showcases your ability to save and highlights your financial dependability as a mortgage applicant.

In addition to the deposit, it’s essential to consider other costs associated with obtaining a mortgage, such as arrangement fees, solicitor fees, property survey fees, and potential expenses related to using a mortgage broker in Durham.

By accounting for these expenses, you can gain a comprehensive understanding of the financial commitment involved in the homebuying process.

Effective planning and wise budgeting will empower you to save for your mortgage deposit with confidence, bringing you closer to achieving homeownership in Durham.

Are there any schemes available?

There are numerous government-led schemes available that can help you in boosting your mortgage deposit or saving for one. It is worthwhile to explore your eligibility for these schemes.

One of the popular options is the Shared Ownership scheme, which allows you to secure a mortgage for a percentage of a property, reducing the initial deposit required.

Through this scheme, you can obtain a mortgage for 10-75% of the property’s value, making it a helpful option for starting your first time buyer mortgage journey in Durham.

Additionally, there are several other schemes available, including the Lifetime ISA, first homes scheme, and the mortgage guaranteed scheme.

If you are interested in any of these schemes or would like to gather more information, feel free to reach out to us or book a free mortgage appointment online with one of our experienced mortgage advisors in Durham.

For further details, you can also visit the government’s OwnYourHome website, which provides comprehensive information on the available schemes and their respective benefits.

Help From Elsewhere 

Receiving a gifted deposit can provide a valuable boost to your mortgage deposit, enabling you to enhance your homebuying prospects.

A gifted deposit refers to a generous contribution towards your mortgage made by a family member or friend. It’s important to note that a gifted deposit is not a loan but a genuine gift, meaning it is not expected to be repaid in the future.

This type of financial support can make a significant difference in helping you achieve your homeownership goals. It increases your available funds for the deposit, making it easier to meet the required amount and potentially access more favourable mortgage terms.

When receiving a gifted deposit, it’s essential to ensure that all parties involved, including the lender, are aware of the source of the deposit and the nature of the gift. This will ensure compliance with any legal and regulatory requirements associated with the mortgage application process.

If you have the opportunity to receive a gifted deposit, it can be a valuable asset in your homebuying journey, enabling you to achieve your dream of homeownership.

Review Your Outgoings

It is important to review your current monthly bills and subscriptions to identify potential areas where you can save money. By conducting an audit of your expenses, you can identify opportunities to reduce costs and allocate more towards your mortgage deposit savings.

Take a close look at each bill and subscription to evaluate if there are more cost-effective alternatives available. Consider comparing prices and exploring different providers to ensure you are getting the best value for your money.

By finding cheaper alternatives or negotiating better deals, you can increase your monthly savings, contributing more towards your mortgage deposit.

Additionally, it is beneficial to assess any memberships you currently hold. Determine if there are more affordable alternatives available or if you can reduce the number of memberships you maintain.

Cutting back on unnecessary subscriptions can free up additional funds that can be directed towards your mortgage deposit.

Remember, the more money you are able to save each month, the faster you can accumulate the necessary funds for your deposit. By being proactive in identifying areas to save, you can make meaningful progress towards your homeownership goals.

Have you considered buying a property with a friend or partner?

Purchasing a property with a friend or partner is a common choice among many first time buyers in Durham. This option is popular because it allows you to combine your savings, effectively doubling your purchasing power.

It is important to exercise caution when creating financial links with others. If your friend or partner has a poor credit history, it could potentially impact your own eligibility for a mortgage.

For instance, if they have a default on their credit record, it may hinder their ability to secure a mortgage, which could impact your joint application.

Fortunately, there are specific mortgage options available for individuals who wish to buy a property jointly with a friend or partner. These mortgages are designed to accommodate such arrangements and provide suitable financing solutions for joint buyers.

It’s essential to explore these mortgage options and consult with a mortgage advisor to understand the specific requirements and benefits associated with each type of joint mortgage.

A mortgage advisor can guide you through the process and help you choose the most appropriate mortgage product based on your unique circumstances.

By making informed decisions and carefully considering the financial implications, you can navigate the process of buying a property with a friend or partner successfully.

Joint Tenants

With this type of mortgage, both parties jointly own the entire mortgage and have equal ownership rights over the property. In the unfortunate event of one party passing away during the mortgage term, the full ownership of the home will automatically transfer to the surviving owner.

Lenders view both parties as a single entity, and any decisions regarding the sale or remortgage of the property will require mutual agreement and cooperation from both joint owners.

This means that if you and your co-owner decide to sell or remortgage the property, you will need to come to a consensus and act together.

It’s important to maintain open communication and discuss any plans or decisions related to the property with your co-owner. By working together, you can ensure a smooth and mutually beneficial process for selling or remortgaging the property in the future.

Tenants in Common

This type of mortgage allows for multiple owners, each with their own specific shares in the property. The ownership shares do not necessarily have to be equal and can be determined based on each owner’s contribution or agreement.

In the future, as individual shareholders, you have the flexibility to sell or transfer your shares in the property. This means that you can potentially sell your share to another party or gift it to someone else, subject to any legal agreements or restrictions in place.

It’s important to consult with legal professionals and follow the necessary procedures when transferring or selling shares in the property. They can guide you through the process and ensure that all legal requirements are met to protect your interests and rights as a shareholder.

Saving For a Deposit if You Have Bad Credit in Durham

Having bad credit may require you to save a larger deposit to meet the requirements set by lenders. In many cases, lenders may ask for a deposit ranging from 10% to 15% if you have a less-than-ideal credit history.

Consequently, you may need to dedicate more time to saving up for your deposit, which can be challenging but necessary, however, it’s not all discouraging news.

There are steps you can take to improve your credit score, which can ultimately enhance your borrowing prospects. Consider implementing the following tips to work towards improving your creditworthiness:

Register on the Voter’s Roll

Ensuring you are registered on the electoral roll is essential as it provides proof of your current address and establishes your reliability in the eyes of lenders.

To enhance your creditworthiness, double-check that all your personal information, including your name and address, is accurately spelled and consistent across various platforms.

This consistency applies not only to your electoral registration but also to your banking records, store cards, billing addresses, and other relevant accounts.

By aligning your address information across different platforms and verifying its accuracy, you present a cohesive and trustworthy profile to lenders. It reinforces your reliability as a borrower and instils confidence in your financial responsibility.

Regularly reviewing and updating your personal information, particularly your address, ensures that your records remain up-to-date and aligned. This proactive approach helps maintain a strong credit file and further strengthens your credibility with lenders.

Try to Keep Within Your Maximum Limit

Utilising your credit card to its maximum limit and carrying a balance without paying it off each month can have a negative impact on your credit score. To maintain a healthy credit profile, it’s advisable to use your credit card responsibly by paying off the balance in full every month.

By paying off your credit card balance in full, you demonstrate responsible credit management and financial discipline. This shows lenders that you can effectively handle credit without accumulating excessive debt.

Moreover, consistently paying off your credit card balance helps establish a positive credit history, which is crucial for future credit applications and favourable terms on loans and mortgages. It portrays you as a reliable borrower who can manage credit obligations effectively.

Therefore, it’s recommended to use your credit card judiciously, keeping your balances low and paying them off in full each month. This practice contributes to a healthy credit score and improves your overall creditworthiness.

Meet Payment Deadlines

It’s crucial to prioritise meeting payment deadlines and ensuring that you have sufficient funds in your account when credit card payments are due. Consistently adhering to these practices has a positive impact on your credit rating.

By consistently making timely payments, you demonstrate financial responsibility and reliability to lenders. This contributes to building a positive credit history, which is a key factor in determining your creditworthiness.

To ensure timely payments, consider setting up automatic payments or setting reminders to help you stay organised. By doing so, you can avoid late payments, which can negatively affect your credit rating.

Consistency in meeting payment deadlines and maintaining a strong payment record demonstrates your ability to manage your financial obligations effectively. This responsible behaviour enhances your credit rating and increases your chances of obtaining favourable terms on future credit applications.

By making payment punctuality a priority and managing your finances diligently, you can foster a positive credit rating and establish a solid foundation for your financial well-being.

Close Down Any Unused Credit Accounts

It’s important to consider closing any credit accounts that you no longer use or have no intention of using. Keeping unused accounts open can potentially have a negative impact on your credit file.

Having an old address linked to an account can create discrepancies and affect your credit score. Therefore, it’s advisable to update your address information and ensure that all accounts reflect your current and accurate details.

This advice also applies to store accounts. If you have store accounts that you are no longer using, it’s beneficial to close them down. By doing so, you can streamline your credit profile and prevent any potential negative impact on your credit score.

Taking proactive steps to close unused accounts and update your address information helps maintain a clean and accurate credit file. This contributes to a healthier credit profile and improves your overall creditworthiness.

Detach Yourself From Any Financial Links to Others

Being financially linked to someone with a poor credit history can have a detrimental effect on your own credit score. This situation often arises in cases of divorce or separation, where both individuals remain financially connected and their actions can mutually impact each other’s creditworthiness.

When you are financially connected to someone with bad credit, their financial behaviour, such as missed payments or defaults, can potentially affect your creditworthiness. This can make it more challenging for you to secure credit or obtain favorable terms on loans and mortgages.

To protect your credit score, it’s important to sever any financial connections with individuals who have bad credit. This may involve closing joint accounts, removing your name from shared loans, or taking other necessary steps to ensure your financial independence.

By taking proactive measures to disentangle yourself from these connections, you can safeguard your own credit score and maintain a strong financial standing. It’s always best to consult with a financial advisor or credit expert for guidance tailored to your specific situation.

Our Expert Mortgage Advisors in Durham

If you’re embarking on the journey of saving for a mortgage and seeking expert advice in Durham, our team at Durhammoneyman is here to help you.

We understand that starting the mortgage process can feel overwhelming at times. That’s why we’re dedicated to providing a helping hand and easing your concerns. With over 20 years of industry experience, we have the knowledge and expertise to guide you through the process.

To get started, you can conveniently book your free mortgage consultation with one of our experienced mortgage advisors in Durham. Whether you prefer to book online or give us a call, we’ll ensure that you receive personalised guidance tailored to your specific needs and circumstances.

At Durhammoneyman, we’re committed to helping you navigate the complexities of the mortgage journey and making informed decisions. Contact us today to arrange your free mortgage appointment and take the first step towards achieving your homeownership goals in Durham.

Date Last Edited: December 6, 2023