Five Tips to Help You Find That Mortgage Deposit

Saving up for anything in these credit-crunch days can be a bit of a strain, but when the item in question is as big – and as important – as a mortgage deposit, the pressures involved can be enormous. How do you get started?

If you’ve been reduced to scrabbling down the back of the sofa for loose change, don’t panic. Here are five tips to help you on your way to sorting out your mortgage deposit.

1. Start early.
It sounds obvious, but it’s true. If you can approach your mortgage deposit with several months (or, better yet, years) of savings behind you, you’re going to be in a much stronger financial position, and many of the worries typically associated with scrimping and saving at the last minute will be greatly reduced. If you’re thinking of trying to get your foot on the property ladder in the not-too-distant future, start saving for your deposit now.

2. Start a budget.
When you’re saving for anything, it’s crucial to know how much you can afford to put away every week or month to reach your goal. Even if it’s only ten pounds a week, that’s still over five hundred pounds in a year – and it soon adds up. Knowing what you can afford to save gives you a target you can realistically stick to, and before long you’ll have enough to meet your needs.

3. Make savings.
Saving is, by definition, not spending money when you don’t have to. Look at your daily expenditure, and see if there are places you can cut down. Do you really need to keep that high-priced gym membership? Would it be cheaper to take a thermos into work, rather than shelling out £2.50 on a coffee house latte every morning? Is your pack-a-day habit costing you more than just your health? Tightening your belt a little can make a big difference, even if you only choose to make it a temporary solution. However, more permanent savings can also be made by taking the opportunity to scout for savings on your car tax, gas and electricity bills, or internet service provider. Better yet, if you do manage to find a saving here, the extra money can go right into your deposit without affecting your way of life one bit.

4. Use the services your bank offers.
If you’ve got a substantial amount of money saved up, stick it in a high interest savings account or a tax-free ISA to make sure your money is working for you, rather than just sitting in a standard current account.

5. Join up with friends.
First-time mortgage buyers who are in a couple typically have a major advantage in trying to save up for a deposit: dual incomes. However, singletons shouldn’t despair. Many lenders are starting to allow joint mortgage deals, letting up to four individuals share at a mortgage – a big help to those who are already looking to buy with friends. It’s certainly worth asking around, as four incomes can make the house-buying process a lot easier.

Finding that mortgage deposit

The excitement of buying a new home can be overwhelming. Unfortunately, the overwhelming amount of details to remember when buying a home and getting a mortgage can be overwhelming for a different reason. Trying to keep track of everything that goes into buying a home can be difficult. One of the most important things to remember is that when you obtain financing for your purchase, there are two type of deposits typically required. This means that you need to have funds available at the point of purchase, or have plan in place to over these payments. Finding that mortgage deposit is vital to a smooth transition into your new home.

The first type of deposit comes at the point of the exchange of contracts with the home seller. Usually, most homeowners require an upfront deposit from a buyer as a commitment to go through with the sale. The standard deposit amount is around 10 per cent. If you are purchasing a property that has a sale price of 100,000 Pounds, your down payment would like be around 10,000 Pounds.

The second typical point of deposit is the mortgage deposit. The mortgage deposit is the amount that covers the difference between the purchase price of your home and the amount of financing you are getting from your mortgage provider. For instance, if you are financing 90 per cent of your home that is purchased for 100,000 Pounds, the balance is 10,000 Pounds. If this is paid as an exchange deposit, you would owe nothing additional. However, if you financed 80 per cent, the balance would be 20,000 Pounds. You would still owe 10,000 Pounds for the mortgage deposit.

Finding that mortgage deposit is often a key step in buying a new home. These deposits are easily the biggest upfront cost to buying a new home. There are several options to coming up with the funds needed to cover these deposits. Deciding which option is best for you and your situation is important.

Here are some of the most common sources for paying the exchange and mortgage deposits:

• Using funds from the sale of your existing home if you have equity built up
• Savings you have built up in preparation for the purchase of your first home
• A 100 per cent financed purchase (Be aware that mortgages that cover over 90 per cent of the purchase price are all but extinct following the global credit crunch and those that are available often include hefty fees or higher interest rates)

Finding that mortgage deposit is critical to the home buying process, as you can see. Building up savings before a first time buy is certainly prudent. Building up equity in your existing home is also a great help when moving. It is always best to avoid borrowing more than 90 per cent of your new home’s purchase price to avoid the higher-lending charge. Because of the increased risk to the bank, lenders use these fees or higher interest rates to offset the potential losses. You will save a great deal over the course of your loan by having adequate resources to make your deposit.