Minimum Mortgage Deposit: You’ll be suprised!

Q: How much deposit do I need to buy a house?

A: Traditionally, lenders require a 10% deposit when buying a property. Most high-street and traditional lenders stick to this.

Q: Are there mortgages with less than a 5% deposit?

A: Yes, there are 5% deposit mortgages, and recently, 0% deposit mortgages have appeared in the market.

0% deposit mortgages:

• Lenders assess your rent payment history. For example, if your future mortgage is £1,500 and you have been paying £1,500+ in rent, you may qualify.
• Credit score: Must be impeccable.
• Caveats: The lender takes on the full risk, so the criteria are stringent, including affordability and consistent rent history.

Q: What are alternative schemes to 0% deposit mortgages?

A: Several schemes can help reduce your deposit requirement or make buying more affordable:

1. Shared Ownership Scheme
   • Primarily for new houses or properties under existing shared ownership.
   • Involves buying a share of the property with a Housing Association:
   • Example: £200,000 property, buy a 25% share (£50,000).
   • Mortgage only needed on the £50,000 share.
   • Deposit required: 10% of £50,000 (£5,000), which is 2.5% of the full property value.
   • Government LISA (Lifetime ISA) bonus can reduce the deposit further.
   • The remaining 75% of the property is rented, with the option to gradually buy more shares over time.
2. Mortgage Guarantee Scheme
   • Allows first-time buyers to purchase a property with a 5% deposit.
   • The government guarantees the bank against losses in case of repossession.
   • Makes it safer for banks to lend with smaller deposits.
3. Help to Buy / Regional Help to Buy Schemes
   • Help to Buy England has ended, but Wales and some regional schemes are still available.
   • Requirement: 5% deposit.
   • Properties in Wales may be more affordable, making the scheme accessible even if you work remotely.
4. Lender-Specific Schemes
   • Some lenders offer up to 5.5 times your income instead of the industry average of 4.5 times.
   • Small boutique banks may offer unique schemes for first-time buyers, sometimes including new build incentives requiring only 5% deposit.

Q: Are all banks offering 5% deposit schemes?

A: No, not all banks offer these schemes. Availability varies, so consulting a mortgage adviser is important. They can guide you on which lenders offer such schemes and help match them to your circumstances.

Q: How does shared ownership work in practice?

• You buy a portion (e.g., 25%) of the property.
• Mortgage and deposit apply only to your share.
• Rent is paid on the remaining share.
• Over time, you can buy more shares to eventually own 100% of the property.

Summary

• Traditional deposit: 10%.
• Emerging options: 5% deposit, 0% deposit (strict criteria).
• Alternative schemes: Shared Ownership, Mortgage Guarantee Scheme, Regional Help to Buy, Lender-specific schemes, and LISA bonuses.
• Advice from a mortgage adviser is crucial for navigating these options and identifying the best path.