Why first time buyers need to save a large deposit

When you start out on the journey to buying your own home, it can seem as though you are on a never-ending cycle of saving and penny pinching, in a desperate attempt to secure a reasonable deposit.

In previous years, some lenders offered 100% mortgages, so that buyers could move in to their new homes as quickly as possible. So why has that changed?

Currently, if you want to borrow money to buy a house, you will probably have to save a minimum deposit of 5% of the property value. However, if you manage to save a 5% deposit, you are not guaranteed to be offered any of the more favourable deals, as lenders will view you as a higher risk than someone who has placed a larger deposit down for their new home.

Lenders consider buyers with a low deposit to be a higher risk, as the lender would face a much higher financial loss if you were to default on the monthly mortgage payments and the house value fell. This became much more of an issue for lenders following the credit crunch, when huge numbers of repossessions occurred, due to homeowners being unable to repay the large mortgages they had taken on.

However, there are now a number of government backed schemes available to help you to achieve a reasonable deposit for your dream home, and lenders are slowly becoming more likely to offer a mortgage to buyers with smaller deposits.

A CeMAP qualified mortgage adviser can help you to apply to the lenders who offer products to those with a smaller deposit.


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