Prior to the disastrous credit crunch in 2007, mortgages were really easy to get. People who couldn’t even afford a mortgage were still being granted one. This forced lenders to bring forward 100% and sometimes 125% mortgages. This made it almost impossible to obtain a mortgage during this time, putting down a deposit had never been harder.
The market began to slowly crawl back to its rightful place and lenders eventually got more confident and relaxed. Then 95% mortgages came back and the market looked like it was on for a strong recovery.
As your local Mortgage Broker in Sheffield, we know how difficult it can be to get a mortgage. We also know that we are still suffering from the credit crunch even though it was 13 years ago! So, we want to help you, come and speak to a Mortgage Advisor at Sheffieldmoneyman.
A Broker like us can give you expert Mortgage Advice about the current property market in Sheffield and recommend how to put down a deposit for a mortgage. It is more than common for a First Time Buyer in Sheffield to come to us and ask us questions like “How do I put down a deposit?”, we would like to share with you what we have heard in our experience:
A 5% deposit is always the minimum required for putting down a deposit. If you want to increase your chances of being accepted the mortgage, putting down more than 5% will help as you are showing the lender that you can easily afford the deposit and are financially stable. This makes you appear as less of a risk to them. Lenders products will come in bands of 5% with 95% being the most expensive, then they reduce as they go down to 90%, 85%, etc.
Yes, you can, however, it could lower your chances of being accepted for a mortgage. This is because you are committing yourself to another recurring payment on top of your mortgage. The lender could consider this as a risk and think that you might not be able to afford both sets of credit commitments. You are basically borrowing the full 100% of the purchase price so consider your other options before rushing to your bank asking for a loan to put down a deposit.
Gifted deposits are becoming more popular than ever. They are as simple as a family member or a friend gifting you all or just some of your 5% deposit. This can only be a gift and it cannot be a loan. The lender will ask for the family member or friend to provide ID and information about where the money has come from. They have to do this for anti-money laundering purposes.
We commonly see First Time Buyers in Sheffield receiving gifted deposits. It’s usually parents who see their children struggling to take that first step onto the property ladder so they offer a helping hand. To find out more about Gifted Deposits, click here.
You will always need to evidence where you have got your money from when putting down a deposit for a mortgage. Lenders will ask you for bank statements to look at your monthly/yearly incomings and outgoings. They have to be sure that you will be able to afford a mortgage. Everything has to be taken into account. Having a large sum of money that you have saved up in an account can also help. Lenders like to see that you are able to stick to long term financial commitments.
If you have deposited a large amount of cash into your bank recently, you will need to provide evidence of where this has come from. They need to see everything, so make sure you have receipts for large purchases and that you can prove the exact price that you sold something for also showing that it matches your bank statement.
Lenders don’t tend to like large lumps of cash being deposited at a time so you need to prove where you have got this money from. The longer that the funds have been in your account, the best it looks in the lenders’ eyes.
Proving the source of the deposit (audit trail) can be the trickiest part of the application sometimes.
If you are selling a property, then the Memorandum of Sale given to you from the Estate Agent is your proof.
If you qualify for the Help to Buy Equity loan scheme, you will still have to put down a minimum of a 5% deposit. The Help to Buy Equity Loan is only available to you when you are purchasing a newly built property. To see if you qualify, you can always speak to an experienced Mortgage Advisor in Sheffield like us.
The deposit can be topped at 25% as the government will give you a 20% loan. This means that you are more likely to be accepted for the mortgage as you have a higher deposit. But remember, on top of your mortgage payments you will have to pay back this 20% loan. You usually get 5 years to pay off this loan and if you don’t manage to do so in this period, then you will start to receive interest on it. For more Help to Buy advice in Sheffield, check out our Help to Buy Mortgage Advice page.