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High Deposit Mortgages

Everything you need to know about how the size of your deposit can help your application

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 21st February 2020 *

Will a large deposit help me get a mortgage?

Too often, we speak to worried buyers who fear their finances will stop them from purchasing a home. Bad credit history, self employment and the uncertainty of how they’ll save a large deposit, can prevent people from applying for a mortgage.

In this article we’ll tell you everything you need to know about large deposit mortgages.

This includes:

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What is considered a large deposit for a mortgage?

Usually, the minimum deposit that a high street lender will ask for is 5% of the property value. However, the choice of lenders and deals can be restricted, and in some cases, come with an unfavourable interest rate.

In fact, many lenders suggest to borrowers that they need a deposit of 10%, while the really competitive rates start at around 25%, which would be considered a large deposit.

Of course, a buyer (if able to) can put down an even larger deposit, whether that be from the sale of an existing property or money that they have saved up, and if you’re in a position to do that, it can pay off in the form of favourable rates and/or reduced loan time.

Not all lenders are the same when it comes to deposit requirements

Of course, in some circumstances, getting a mortgage with a large deposit can be easier, but this is not always the case.

The good news is that all lenders are different and use varying criteria when assessing whether a person will be accepted for a mortgage.

Therefore, there is no standard amount that people need to have saved up before they can get a mortgage.

Often buyers fear that their financial circumstances will result in their application being declined, but the size of your deposit isn’t the only factor mortgage providers will consider when assessing your eligibility.

The following variable could also influence their lending decision and it all comes down to affordability…

  • Your credit rating:
    Clean credit will almost certainly help your cause at most lenders, but some providers specialise in borrowers with adverse credit ratings.
  • Your salary:
    Obviously, the more money you have coming in each month from a stable job, the better. That said, there are specialist mortgage providers who cater for low income borrowers and the self-employed.
  • Other outgoings:
    If you’re applying for a mortgage with no other significant debts to your name, most lenders will consider you lower risk than somebody with major debts still to pay off, and may therefore offer more favourable rates.
  • The property type:
    Most lenders, especially mainstream, are more likely to offer you favourable mortgage rates if the property in question is made primarily of bricks and mortar. Features such as timber frames and thatched roofs are considered non-standard, and may require a specialist lender.
  • Your age:
    Most lenders prefer borrowers who are over 21 and under 75 at the time of the application, but specialists operate outside of these age parameters.

If you meet some or all of the criteria above, you’ll have a stronger chance of getting a favourable deal regardless of your deposit size, so make an enquiry and the experts we work with will help you find a lender tailored to your circumstances.

Will a large deposit get me a better mortgage deal?

High street banks and lenders categorise mortgages according to their loan-to-value, (otherwise known as LTV). This is defined as the percentage of the mortgage (amount you borrow) against the value of the property.

To break it down, if you had a 10% deposit, you would need a 90% LTV mortgage.

So the rule of thumb for most providers is that the larger your deposit, the cheaper your mortgage rate will be.

This is because a larger deposit will pay off a larger chunk of the property value, meaning that you’ll most likely borrow less and the lower the loan-to-value.

Lenders often have bands in which rates become cheaper. They get cheaper like this because the more equity you have, the lower risk you are to the mortgage provider if your property loses its value.

In terms of interest rates,

  • Those with a 10% deposit or lower (90% LTV and up) will be charged the most
  • Those with 25% (75% LTV) will be charged less
  • Those with 40% (60% LTV) will be charged the least

Therefore, the bigger the deposit you have, the more competitive the mortgage deals with lower interest rates. This is because the more money you have to put towards a property, the less of a risk you pose.

Can a large deposit affect my mortgage repayments?

Furthermore, a big deposit can also result in a smaller mortgage as you may potentially borrow less. This is great for applicants looking for lower monthly repayments.

This could increase your chances of being approved for a mortgage as smaller repayments could be deemed as more affordable for someone with a lower income.

The table below illustrates how a large deposit can result in smaller repayments.

Property Price Deposit Percentage Deposit amount (GBP) Mortgage amount required (GBP) Monthly repayments (3% interest rate)
£200,000 10% £20,000 £180,000 £853.58
£200,000 20% £40,000 £160,000 £758.74

If I have bad credit, do I need a larger deposit?

We have helped many homeowners with what’s known as adverse credit. Many people assume that because they have a low credit score or have bad credit, they can’t get a mortgage. This isn’t necessarily true.

In fact, some lenders will approve on minor defaults, and there are also others who will still approve a mortgage when there’s a been a default on a secured loan, for example, a missed payment on financed car.

Often in these cases, a larger deposit of 20 to 25% can improve the likelihood of being accepted for a mortgage but this is not always the case as other affordability factors can be considered including:

Again, lenders will consider:

  • Your Loan to Value
  • The severity of the default
  • Number of defaults
  • How recently they occurred
  • Whether a default is satisfied or not

The best approach is to get help from someone knowledgeable about adverse credit and it can also be really helpful to check your credit history to establish any financial issues you may have on your report.

If you’re worried about adverse credit or just need some reassurance, one of our advisors can offer you a free trial on either CheckMyFile, credit monitor (call credit) and Experian, so get in touch and we’ll connect you for whole-of-market advice. If you wish to get a free credit report yourself, you can do so here.

What if I have a high deposit but low income?

We have helped many homeowners who have previously been declined for a mortgage because they have no job or a low income despite having a large deposit.

When assessing a low income high deposit application, lenders need to know that a borrower can afford their mortgage repayments and may look at other expenses you have including other loan payments, bills or property repairs you may have in the future.

It may also help your cause if you have other sources of capital in addition to your basic wage, such as…

  • Benefits
  • Commission/overtime/bonuses
  • Freelance work
  • Stocks, shares and pension funds
  • Assets
  • Cash savings

This will provide a lender with the knowledge that you are able to pay your mortgage comfortably and avoid missing payments and accumulating debt.

High deposit mortgages and self-employment

Usually high street banks and building societies require self employed people to have two years of accounts in order for the borrower to prove that they have a track record of regular work. However, there are now lenders who will consider an application with just one year of accounts.

When a self-employed person applies for a mortgage, accounts need to be up to date and give an accurate representation of their finances and income. It can be helpful to hire an accountant to prepare your accounts and a top tip is that some lenders ask that the accountant is certified or chartered.

Will a larger deposit be required if I’m self employed?

Often a larger deposit between 20% and 25% may be needed as lenders can view self employed borrowers as riskier due to the uncertain nature of their employment.

Thankfully, this isn’t always the case and there are specialist lenders who will accept a lower deposit.

Top tips for self-employed mortgage applicants

  • Ensure that your accounts are up to date
  • Hire a certified or chartered accountant
  • Speak to one of the expert advisors we work with
  • Save as much deposit as possible
  • Don’t minimise your income too much for tax purposes – it will affect your chances of getting a mortgage.
  • Don’t avoid applying for a mortgage if you’re self-employed – there are lenders who can approve you, and the advisors we work with know who they are.

Help with saving for a larger deposit

As a first time buyer, saving can be really difficult, especially if you need to save a high deposit.

There are many options and mortgage products that can be really helpful if you are finding it difficult to save for the deposit you need.

Help from the government

In March 2013, Help to Buy was launched to help anyone finding it hard to save a deposit for their first home. There are two government schemes from Help to Buy that can be useful for those trying to save a large deposit for a property:

  • Help to Buy: Equity Loan
  • Help to Buy: ISA

Help to Buy: Equity Loan

An equity loan is a great option for someone who needs a deposit for a mortgage and is happy to borrow it as an interest free loan.

It requires the buyer to raise 5% of the property value as a deposit and then the government will provide up to a further 20% as a loan.

The buyer would then have access to more attractive mortgage rates from lenders who participate in the scheme as it gives banks and building societies the peace of mind to lend larger mortgages due to the buyer’s combined deposit of up to 25%.

Help to Buy: ISA

A Help to Buy: ISA can help increase your savings, allowing you to accumulate a larger deposit quicker.

For every £200 you save into an account, the government will provide a bonus of £50.

This would mean that if a £3,000 deposit was saved, an additional £750 would be provided as a booster by the government.

To qualify for a Help to Buy: ISA, you must:

  • Be aged 16 years or over
  • Be a UK resident
  • Be a first time buyer
  • Not have another active cash ISA in the same tax year

Additionally, a Help to Buy: ISA account is available to each first time buyer, not each household.

This means that if you and your partner are both saving deposits to get a mortgage as first time buyers, you could each have a Help to Buy: ISA, and receive a government bonus of up to £6,000 towards your first home.

Is there a way my parents could help me get a mortgage with a large deposit?

Yes. More and more parents are helping their children onto the property ladder by helping them raise a larger deposit than they could on their own.

Parents have opted to use their own money or equity in order speed up the mortgage process for their children as often saving a large deposit for a mortgage can take years. (It also means that their children don’t have to live at home with them forever!)

There are a few ways in which parents or loved ones can help.

Gifted deposits

Some lenders will allow gifted deposits from family members or friends in order to raise a large deposit for a mortgage. A handy tip is that if a person is gifting you some money, they will need to complete a gifted deposit letter - although sometimes lenders have their own form to complete.

This is just to confirm that they have no interest in the property and will not be making arrangements for or demanding the money to be repaid in the future.

Equity release

Equity release is a type of mortgage that allows a home-owner to release funds. Often, no repayments are required and the loan is repaid when the home-owner dies or goes into permanent care.

A Springboard Mortgage

A Springboard Mortgage allows a family member to use part of their savings as security against your mortgage. They would be asked to place the money (usually 10% of the property value) into a secure account.

As long as you make your repayments on time, they will have the money returned, with interest, in three years time.

This option can appeal to both parents and first time buyers as it provides the peace of mind of knowing that the money borrowed will be returned.

Could a large deposit mortgage calculator help me?

A mortgage calculator can provide an idea of how much an applicant can borrow based on their personal and financial circumstances.

It can also give a guide as to how much an applicant repays each month based on their deposit size, mortgage rate and other factors. Every lender uses different criteria in order to calculate affordability.

These could include:

  • Deposit size
  • Deposit source
  • Income
  • Income source
  • Property type
  • Equity

You may receive a different estimation on how much you could borrow, so keep this in mind if you use one and feel unhappy with the quote you receive.

The key to truly understanding what deposit you’ll need for a mortgage is to get the right advice for your situation.

The advisors we work with can take your information and provide you with more accurate information on how much deposit you may need.

Should I get advice before applying for a high deposit mortgage?

Yes! We always recommend getting advice from a mortgage advisor before making an application.

Non-judgemental and helpful advice can really put your mind at ease, especially at a time that could feel overwhelming.

It can also save you a lot of time as a mortgage advisor can dedicate their time to research the best lenders based on your circumstances and can assist you through the process of applying for a mortgage.

The advisors we work with are experts and can find out how much deposit you’ll need. They will be more than happy to help you, without charge, obligation or leaving marks on your credit rating.

We can find the right advice for you

You can be assured that the brokers we work with will have with specific experience with the mortgage you are looking for, whether that be big deposit mortgages or another product more suited to you.

How do we know? Well - we train them ourselves. Each one has to complete a 12 module LIBF accredited training course, and only license them provided they prove they know exactly what they are doing.

Whether you’ve been let down by a lender or just feel unsure about what to do next, we’re here to help.

Talk to an expert deposit advisor today

If you have questions and want to speak to an expert for information advice, call 0808 189 2301 or make an enquiry.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 21st February 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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