If you’re ready to become a homeowner but are unsure how much deposit is required for a mortgage, you’re in the right place. This guide explores what a deposit is, the interest bands in 2024 and helpful tips on how to save for your new home.
What is a mortgage deposit?
A mortgage deposit is the amount you pay upfront when buying a new home. Your mortgage covers the rest.
What are the interest bands in 2024?
The interest bands in 2024 are:
• 10% deposit (90% LTV) – highest interest
• 25% deposit (75% LTV) – lower interest
• 40% deposit (60% LTV) – lowest interest
What is the minimum deposit required for a mortgage?
The deposit required for a mortgage is typically 10%, but some lenders may let you buy with just 5%. This means you can take out a 95% mortgage.
If you’re struggling to build your deposit, Skipton Building Society’s 100% mortgages could be suitable for you.
Why is it better to have a big deposit?
Mortgages are often described in terms of ‘loan-to-value’ (LTV) – the percentage of the home’s value that you borrow from the bank. So, if you have a 10% deposit, your LTV would be 90%.
Having a bigger deposit means lowering your LTV. With a lower LTV comes lower interest rates and mortgage repayments.
What deposit do I need for Shared Ownership?
When buying your home through Shared Ownership, you purchase a share between 10% and 75% of the home’s full market value. Because you’re only buying part of the property, you’ll need a smaller deposit and mortgage – typically 5%.
You’ll pay rent on the part you don’t own, as well as ground rent and service charges.
What low-deposit schemes are available?
Buying your new home with Barratt Homes means accessing unique low-deposit schemes.
Deposit Unlock
Deposit Unlock helps you buy your first home with a 5% deposit, meaning you can purchase with a 95% mortgage. It’s only available for selected newly built homes.
Parent Power
If your parents are helping you buy your first home, we can give you additional support via the Parent Power scheme. We’ll match the help you’re receiving up to a maximum of 5% of the purchase price and offer an extra 1% contribution towards your flooring.
Deposit Boost
If you have a 10% deposit, we could boost it with a further 5% of the sale price, giving you a 15% deposit to work with.
Tips to save for a mortgage deposit
Knowing roughly how much you want to spend on a property can help you calculate the amount you need to save each month. Below are some of our top tips.
1. Open a savings account
The first step towards saving for your deposit is opening a savings account. You can set up a standing order so that the money comes out of your account automatically. When choosing a savings account, consider the following:
• Do you need instant access to your money?
• Could you get a better interest rate with a limited access or fixed-rate account?
2. Open a Lifetime ISA
The government’s Lifetime ISA is another great way to build up your savings. You can deposit up to £4,000 a year, and they’ll add a 25% bonus to your savings – up to £1,000 a year.
3. Pay off any debts
It’s a good idea to pay off any debts, whether credit card bills or personal loans. This way, you can start building up your savings quickly.
4. Limit your spending
Buying a house is a huge financial commitment, meaning you may need to give up some luxuries. This doesn’t mean stopping ordering takeaways or going on holiday; it simply means being more considerate with your spending.
Our guide to how to save for a house in the UK has plenty of tips to help you prepare. If you’re a first-time buyer, you’ll also find useful information in our homebuying guide.
Discover our homes across the UK, including 2 bedroom and 3 bedroom homes for first-time buyers. We also have fantastic offers to help you become a homeowner, from Parent Power and Deposit Unlock to Kickstart and Deposit Boost.
Call our Sales Advisers today to find your new home.
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