First things first, a deposit is a lump sum you pay upfront, letting you own part of the property outright. During the purchasing process it gives the seller reassurance that you are serious about the purchase.
When agreeing a mortgage, the bigger the deposit, the better deal you are likely to get on your mortgage and the lower your monthly repayments will be.
Your deposit is the biggest thing you’ll be saving for, but having a little bit extra will come in handy for things like solicitor fees, moving costs, new furniture etc.
“For a mortgage with The Cumberland it is currently 5% (subject to eligibility), giving people a bit more flexibility if they haven't saved as much or they haven’t got as much savings or want to keep some back.” - Chloe Sorrenson, Mortgage and Protection Advisor at The Cumberland
We have a mortgage calculator available on our website which is a useful tool when looking at your different options for mortgage size, deposits, and what your future payments are likely to be. You are also welcome to speak with us about your options and ask any questions you like of our mortgage advisers, they are here to help.
Chloe says: “If we get a customer who's potentially got no savings at the moment, it's not that we can't run through an affordability check with them, because we can give them what the loan amount would be and we can work out based on what our current loan-to-value maximum would be.
“If we can lend them X amount I can say to them, for 5%, you need to save this much and then you need to save additional funds and they've got a target that they can meet.”
There are situations in which the 5% mortgage offer does not apply. Mortgages for new build properties at The Cumberland are an example of this. We require a 10% deposit for properties that are within our area, and 15% deposit outside of this.
The reason for this is similar to purchasing a new car – depreciation. When you drive a new car away from the forecourt its value immediately drops as it’s no longer new. A similar thing occurs with a new build property. If you wanted to sell that property in a year or two, its value might have dropped simply by no longer being new, and you might not be able to sell it for enough money to pay off your mortgage. By asking for a slightly larger deposit on new builds, The Cumberland creates a larger gap between the property value, and the value of the mortgage.
5% is the minimum amount of deposit that we require on a mortgage but that doesn’t mean that you can’t pay more.
Saving additional money to put toward your deposit could get you a better interest rate on your mortgage and could also result in reduced monthly mortgage payments in the future.
Every person has unique circumstances. If you’re living at home with parents then this might be the best time for you to save as much money as possible while your outgoings are reduced. However if you’re currently renting, the situation might be different. You would need to balance whether it’s better to stop renting sooner in order to take on a mortgage with a 5% deposit but save on your rental payments, rather than continue paying rent and increasing your mortgage deposit at the same time.
Saving for a mortgage deposit might be harder than saving for something like a new outfit or a computer, so try to set yourself a time goal (such as a year, or two years) and form a habit of putting money away each month. After a while you won’t miss that extra cash as much.
Try to remain committed to the long term goal but don’t be too hard on yourself. If you need to put away less money one month because your washing machine breaks down or because it’s Christmas soon, that’s ok too. And remember to allow yourself the odd treat – if you get too unhappy with saving then you’ll be tempted to give up.
We have some budgeting tips over on the savings section of our website which can be found here.
Once you’ve decided upon your budget and how much money you’ll be able to save, its worth considering putting that money into a dedicated savings account in order to earn interest. We have multiple savings options available, including an account especially designed for First Time Buyers which leads to cashback should you choose to take out your mortgage with us.
Details of our savings accounts can be found here but we are always happy to discuss your options either in your local branch, over the phone by calling 01228 403141, or you can make an appointment to speak with an adviser at a time that suits you.