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Do I need a deposit for a mortgage when buying a house?

Do I need a deposit for a mortgage? Before the credit crunch began, you could get 100% mortgages  which meant you didn’t need a deposit at all to get a mortgage. However, since the beginning of 2008, lenders have been tightening their lending criteria, withdrawing these products from the market and asking for increasingly large deposits from borrowers.

The reason for this is that many previous borrowers are now in negative equity. Basically this means their outstanding mortgage is greater than the value of their house. The banks are starting to lend more responsibly due to this and the fact that many existing borrowers have lost their jobs and are unable to pay the cost of their mortgage.

If they cannot keep up with their repayments,  the bank will repossess their house. However, selling the house would not cover the cost of the mortgage so the borrower would still owe the bank a substantial sum. This is one of the main reasons why lenders are now demanding bigger deposits. By demanding borrowers have larger deposits as a proportion of the value of the house, the borrower is less likely to fall into negative equity.

These days, just to secure a mortgage you will need at least a 5-10% deposit and to be eligible for the best deals you will need as much as 40%. Halifax and Nationwide offer very competitive mortgage deals for first time buyers, To apply for a mortgage with them visit halifax.co.uk or nationwide.co.uk.

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