MONEY TALKS
The more you can put down as a deposit towards the cost of your first home you’re buying, the cheaper your mortgage should be.
This is because mortgage lenders charge lower rates of interest to buyers with larger deposits.
And that’s because a larger deposit means they’re lending less as a proportion of the value of the property you’re buying.
A larger deposit means the property has to fall further in value before the lender’s money is at risk.
Usually you need to put down a deposit of at least 5% of the property’s value, which means you have a 95% loan-to-value (LTV) mortgage – a financial term used by mortgage lenders to express the ratio of a loan to the value of the property being purchased.
HELPING FIRST-TIME BUYERS OBTAIN A MORTGAGE WITH A 5% DEPOSIT
On 3 March 2021, the government announced a new 95% LTV scheme.
The scheme has been created to help firsttime buyers obtain a mortgage with a 5% deposit to buy a property of up to £600,000.
The government has offered lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.
DEPOSIT SIZE
More than half (58%) of firsttime buyers were required to raise a larger deposit due to the pandemic, with an average increase in deposit size of £22,849[1].
A survey of 2,015 prospective and 500 actual first-time buyers found the average deposit size is now £62,572, or around 19% per cent of a property’s value.
The report added that it took firsttime buyers who bought since the start of the pandemic an average of nearly five years to save up enough of a deposit.
HOW FIRST-TIME BUYERS ARE FUNDING A DEPOSIT
• 60% own savings
• 42% joint savings with partner
• 23% will rely on family to help
• 16% inheritance
• 10% borrow from friends
PROCESS OF PURCHASING
The findings of the report highlighted that the process of buying had become increasingly complex over the past few years, with two in five survey respondents saying it took two or more offers to secure a home.
The report also noted that just under half (49%) were in the process of purchasing a property, only for it to fall through, which cost buyers an average £2,402, with one in nine spending £4,000 or more.
COSTS FROM FEES
First-time buyer purchases were delayed by around three months, with one in six saying it was delayed by over five months.
Costs from solicitor’s fees, mortgage fees, conveyancing fees and valuation, moving fees, rent paid to prior homes and estate agent fees set firsttime buyers back, on average, by £4,486.
Source data: [1] Research conducted by Opinium on Aldermore’s behalf in October 2021, with a nationally representative sample size of 2,000 prospective first-time buyers and 500 actual first-time buyers who bought since March 2020.
>> THINKING OF BUYING YOUR FIRST HOME? <<
Being a first-time home buyer is both exciting and daunting, in equal measure.
We’ll help answer any questions you have and guide you through the mortgage process. For more information contact Cedar Crest Ltd – telephone UK T: +44 (0) 203 883 1017,
HK T: +852 6645 4462 – email info@cedar-crest.co.uk
Your home may be repossessed if you do not keep up repayments on your mortgage.
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