Deposit Mortgage Advice in Newcastle
Your mortgage deposit will generally need to be for at least 5% of the value of the property you are buying. For example, if you are looking to purchase a home in Newcastle that costs £180,000, you will need to save up a minimum deposit of £9,000.
Ideally, however, you should aim to save more than 5%, as the more significant the deposit you can build up, the more comprehensive your choice of mortgage options will be. You may also benefit from lower and often better mortgage rates.
Why is a deposit necessary when buying in Newcastle?
In the past, it was common to find 100% mortgages. Back then, Northern Rock were offering 125% loan to value mortgages, meaning if you were purchasing a property valued at £180,000, they would lend you up to £225,000.
The reason why lenders need a deposit is to reduce the risks when they are lending. If they lend you 100% of the purchase price and you happen to fail to keep up monthly repayments, they would then have to take possession of the property. All it takes is a slight dip in house prices for them to be at a loss.
Look at it from a Lender’s perspective, if you can’t save up for, or get help to make up at least a 5% deposit for a property, then you probably aren’t quite ready to take that step onto the property ladder.
Is a 5% deposit enough?
Generally, 5% is enough for most mortgage types. Although it does vary on the lender, some will accept only a 5% deposit. To access a 95% mortgage in Newcastle, 9 times out of 10 you’ll need to have a good credit score. There are lenders out there who may consider you for a 95% mortgage with a lower credit score, but the interest rate might be higher.
How much deposit do I need for a Buy to Let property?
If you are looking to take out a buy to let mortgage in Newcastle, you will be required to put down a larger deposit and most lenders will look for at least 25%.
Can I take out a loan for the deposit?
In theory, this could be possible, but most lenders won’t let you do this, as essentially, this would still be 100% lending, which no longer exists due to the aforementioned risk involved with such a venture.
Can someone gift me a deposit?
Yes, this happens constantly. You might have heard the term the “Bank of Mum and Dad” (both birth and adopted parents, as well as carers & legal guardians) gifting the deposit or other family members such as Aunties & Uncles.
As long as they can evidence the funds, prove who they are and confirm they are not expecting repayment of the gift at any point in time. For more information, we check out our article all about gifted deposit in Newcastle.
Are there any circumstances where I don’t need a deposit?
If you are buying as a sitting tenant and your Landlord or family member has given you a discount from the open market value, or if you qualify for a discount under the Right to Buy scheme. Then typically, you don’t need to put any of your own money in as a deposit. This is due to the equity being already “built-in” in the deal.
Date Last Edited: March 1, 2024
