How much deposit will I need for a home costing £250000?
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I want to deposit as little as possible if I can take advantage of the low interest rates.
WeeMoney
1 year ago
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
it is possible to get a 95% loan on this but would require a parent acting as guarantor. without that you would need a 10% deposit or £25000 but bear in mind on top of that you need to allow for stamp duty £2500 (unless you have never owned property and meet the full HMRC definition of a first time buyer) and £1000 for legal costs at least £500 for survey and on average £999 for lender fees.
however if you had a 15% deposit (£37500) it would slash the rate you would pay by up to 3% per annum! that's huge so for the above property you would save £3000 for every £100000 you borrow, that would equate to a monthly saving to you of well over £500 by putting down more money.
also bear in mind that income multiples are much, much tighter on high loan to value % and you will need an impeccable credit file.
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however if you had a 15% deposit (£37500) it would slash the rate you would pay by up to 3% per annum! that's huge so for the above property you would save £3000 for every £100000 you borrow, that would equate to a monthly saving to you of well over £500 by putting down more money.
also bear in mind that income multiples are much, much tighter on high loan to value % and you will need an impeccable credit file.
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Darren is exactly right. The bigger the percentage that you borrow the lower is the quality of the product (ie, it will have higher rates, perhaps higher fees, and fewer options for you). In other words, you cannot take advantages of low interest rates if you borrow the maximum.
15% to 20% deposit will make a far greater range available, and when selecting the best product, do bear in mind that the fees should be taken into account, as well as the rate that it will return to after any special rate period.
For example, a product with, say, a rate of 2.5% that, after two years, goes to 5% might be much less attractive than one with a rate of 3.5% that continues indefinitely with the same rate calculation method.
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15% to 20% deposit will make a far greater range available, and when selecting the best product, do bear in mind that the fees should be taken into account, as well as the rate that it will return to after any special rate period.
For example, a product with, say, a rate of 2.5% that, after two years, goes to 5% might be much less attractive than one with a rate of 3.5% that continues indefinitely with the same rate calculation method.
Expert Financial Adviser Answer
Richard Salter
answered 1 year ago
As the other contributors state the better the deposit the lower the overall product fees and interest rate is likely to be. Having said that there is no real advantage once you have a 40% deposit or more (which would be nice!).
A Nationwide representative today said to me for his money anyone with such a healthy deposit as fifty per cent might do better to consider buying two properties rather than one - though we were discussing buy to let investment rather than your principle home as the benefits of gearing (borrowing) would work more efficently on two properties rather than one and you should still have reasonable equity up to say 75%.
What we do know is that property prices can fall further and lenders are being wary so do seek to keep the loan you want relative to the property purchase price as low as you can sensibly afford (the loan to vlaue or LTV). Also bear in mind important trigger thresholds such as 60% and 75% LTV at which break points the diffrences between an extra thousand or two borrowed (or not) can make a great deal of difference in the competitiveness of the mortgage deal.
Do watch the hidden extras as Darren sets out in fair detail too as many overloook the hefty stamp duty (1% on purchases from around £175,000 up to £250,000 which will add £2,500 to your bills). Indeed stamp duty gets much heftier being 3% on purchases over £250,001 and up to £500,000, rising to 4% over that purchase price.
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A Nationwide representative today said to me for his money anyone with such a healthy deposit as fifty per cent might do better to consider buying two properties rather than one - though we were discussing buy to let investment rather than your principle home as the benefits of gearing (borrowing) would work more efficently on two properties rather than one and you should still have reasonable equity up to say 75%.
What we do know is that property prices can fall further and lenders are being wary so do seek to keep the loan you want relative to the property purchase price as low as you can sensibly afford (the loan to vlaue or LTV). Also bear in mind important trigger thresholds such as 60% and 75% LTV at which break points the diffrences between an extra thousand or two borrowed (or not) can make a great deal of difference in the competitiveness of the mortgage deal.
Do watch the hidden extras as Darren sets out in fair detail too as many overloook the hefty stamp duty (1% on purchases from around £175,000 up to £250,000 which will add £2,500 to your bills). Indeed stamp duty gets much heftier being 3% on purchases over £250,001 and up to £500,000, rising to 4% over that purchase price.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
Just to correct Richard slightly:
stamp duty kicks in at £125000 at 1%. the only exception is if you live in a government designated "deprived" area in which it is £150000. You can check online if your property postcode falls into such an area and your solicitor will verify too so that they can complete a "nil" return to HMRC.
the £175k limit was returned to £125k on 01-01-2010
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stamp duty kicks in at £125000 at 1%. the only exception is if you live in a government designated "deprived" area in which it is £150000. You can check online if your property postcode falls into such an area and your solicitor will verify too so that they can complete a "nil" return to HMRC.
the £175k limit was returned to £125k on 01-01-2010
Expert Financial Adviser Answer
Paul Ross DipPFS CII(MP&ER)
answered 1 year ago
If you're a first time 10%, minimum, if this is your second house, 5% for a limited amount of companies, but the more you have, the better deal you will obtain
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