Whilst there is no ‘one size fits all’ approach to how much deposit you need, the amount you pay upfront does have an impact on your mortgage outcome.
The smallest deposit required to purchase a property is 5% of the property’s selling price, but the truth is that the bigger your deposit the better loan you will secure.
Not only will the overall mortgage value be smaller, making monthly repayments lower and the potential length of time to pay it off shorter, but you will have access to a better interest rate too.
The most competitive products and rates on the market are available to those who have a deposit of 25% and more.
When it comes to properties over £1million, securing a mortgage over 60% loan to value (LTV) can be a challenge, and can leave you with higher interest rates to pay. This is down to the bank having to lend a considerably larger amount of money, and needing to ensure security over their investment.
In order to secure a higher LTV on a million-pound (and up) home, you will need to consider a private banking relationship.
Many of our clients approach us looking for a 100% mortgage on a residential property, and it is something which can be arranged, but there are conditions that apply. This can’t be arranged on smaller loans, so if you are borrowing under £2million, this is unlikely to be an option.
As with high LTV mortgages on properties over £1million, there are two ways of doing it; with a Lombard loan, or by placing assets under management (AUM) with the bank.
A Lombard loan is when a bank looks at a borrower’s cash and liquid assets, and agrees to lend against them. As long as the assets are pledged to the bank, and can be converted into liquid assets, like bonds and equities, and they are of a good quality and low volatility, a bank will be happy to approve a 100% mortgage.
The second way to do this is via AUM. AUM is when a bank asks a borrower to place a certain percentage of the loan amount – often 20% – for them to invest on their behalf.
Both Lombard loans and loans with AUM will require a private bank, as they tend to look for a relationship with a client, which is why they look for long term investment opportunities.
We have access to over 250 lenders, including private banks, and can guide you on your options depending on the size of your deposit.