Buying a home? The percentage of deposit can have a big bearing!

If you are looking to buy a house with a mortgage from your bank or financial institution, then you will know that a deposit is an absolute requirement. But exactly how much are you supposed to provide? What percent deposit for mortgages is the going rate, nowadays?

It is a very good question, for the answer is not so straight-forward. Before we answer your question, we must explain the money exchanges involved in purchasing a house. It involves two elements: The first is the down payment on the house, and the second is the difference between the mortgage you have secured and the price of the house.

The down payment is the initial amount of money you pay to the seller, to secure the contract. This is usually about 10% of the price of the house. So, if the house you want to buy is £100,000, your down payment should be £10,000.

The mortgage deposit is the difference between the price of your new home and the mortgage that you have been granted from your bank or financial institution. If you have managed to borrow a 70% mortgage (i.e £70,000) from your bank and the house costs £100,000, the mortgage deposit equals £30,000. However, as you have already paid £10,000 as a down payment, you must find the extra £20,000 before you can call the house your own.

Back to your original question, what kind of percentage is the deposit for a mortgage nowadays? Well, in the above case, as you borrowed a 70% mortgage, your overall deposit is 30%. And this is more or less an accurate reflection of the current market trend at the moment. Gone are the days of putting down an overall 10% deposit. Now, getting a 90% mortgage from your bank is almost impossible, given the current financial climate. Anywhere between 15%-30% is the amount you can generally borrow from your bank, depending on your circumstances and needs.

Our advice? It is always better to borrow as least as possible from your bank, to avoid paying loads in interest later. We suggest saving as much as you can comfortably afford and putting down the largest deposit possible.

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