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How to buy your first home with a small deposit




Rachel Zschieschang, Mortgage Advice Bureau (44470103)
Rachel Zschieschang, Mortgage Advice Bureau (44470103)

If you are looking to buy your first home but feel that your deposit is too small, you’re not alone. There are many current homeowners who have been in the same situation so don’t lose hope just yet.

Let’s have a look at exactly what you need to do to get your foot on the property ladder – even if you’ve got a small deposit.

What is a mortgage deposit?

It is usually a lump sum of money that you pay up front when you’re buying a property and often needs to be at least 5 per cent of the value of the property itself. The bigger the deposit, the smaller the mortgage you’ll need to take out to cover the rest of the house’s value.

How can I save for a deposit?

This is the bit that often tends to worry people – but here are a few simple tips that will have you saving quicker than you might think:

  • Slash your spending: it might sound obvious but if you’re committed to buying your first home, you need to ensure you’re doing everything you can to save as much as possible. And as well as saving money, cutting down on unnecessary spending has the added benefit of showing lenders you’re sensible with your money too.
  • Why not create a separate savings pot – saving money in a separate savings account and not touching it is a good place to start.
  • Make use of price comparison websites to help you save money on utility bills, insurance and weekly food shops.
  • Download a saving/budgeting app – like Plum or Yolt – that does the hard work for you. These apps have features that round up your spending to the nearest pound and deposit the difference into a separate savings pot. The likelihood is you won’t even notice.

Make your savings work for you: In addition to saving it’s just as important to make sure you’re saving in the right places. A Lifetime ISA is a brilliant way to boost your savings for example. So why not search around for savings products that could help your savings work even harder?

What should I do if I have a small deposit?

The good news is there are lots of options available to you. The Help to Buy Equity Loan Scheme allows potential homeowners to purchase a new build home with just a 5 per cent deposit if you’re a first-time buyer. I can help you if you’d like to find out more about these schemes so just ask.

Improve your credit score

When you apply for a mortgage, the lender will take a look at your credit ratings to decide whether to lend to you, how much to lend and sometimes, what interest they will charge too.

Improving your credit score will increase your chances of having your mortgage application accepted. You have to make sure you are seen as financially reliable to be eligible for a mortgage.

The first step is to check your current credit score. There are three main credit agencies that hold credit reports on you – Experian, Equifax and TransUnion. If you can, check all three reports and if you spot any mistakes, it is important to get them corrected.

If you happen to have a fairly low credit score, try to take steps to improve it such as using a credit card responsibly, ensuring you don’t pay any bills late and making sure you’re on the electoral roll.

Speak to a mortgage adviser

Finally, if you have a small deposit and want to buy your first home, it’s a good idea to get the right advice from the right people. If you would like a no-obligation chat with someone, then I’m on the end of the phone or email and you can go through the whole process from the comfort of your own sofa. I can often access exclusive offers and products not always found on the high street so I’m in a great position to find the right mortgage for you.

Get in touch with me on 07375 886347 and I’ll be happy to help.

Or visit our website at mortgageadvicebureau.com/cambridge.

Because we play by the book, we want to tell you that your home may be repossessed if you do not keep up with repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances, but a typical fee is up to one per cent of the amount borrowed.

Read more

Paying your mortgage if you are made redundant: what you need to know

Six helpful things you wish you’d known when buying your first home

Negotiating house prices: your key guide from the Mortgage Advice Bureau



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