When it comes to buying your first home, it can be very overwhelming. Besides all the packing and moving, the financial anxiety can really make it hard for you to feel as if you are doing the right thing. If you know what to do, the first-time home buying process can be easy. Here is how to gather your finances in order to know what you need for a deposit.
HOW MUCH SHOULD YOU HAVE BEFORE YOU LOOK?
For most mortgage companies, you are going to need to put down at least 10% of the mortgage to get a loan. In some instances, you can put down 5%. Since the pandemic, banks have been offering this low percentage to buy a home, however, bear in mind, you are going to borrow at a much higher rate because you are putting less money down.
HOW MUCH CAN I BORROW?
This depends on where you are getting your first-time buyer mortgage. Depending on how much money you put down, banks will mostly lend a single applicant four times their annual salary. If you are applying for a mortgage jointly, you may be able to get a loan for four times both of your salaries or four times the first salary plus the second salary. The exact figure is worked out on the lender’s affordability calculator.
Clearly, it’s easier to get more money if you are buying a home with someone else. In some instances, a bank may give you a 100% loan, which means you get 100% of the cost of the property. This kind of loan, however, has one of the highest interest rates making it very expensive. You will also need a guarantor for this loan to promise the bank they will definitely get their money.
HOW MUCH SHOULD MY DEPOSIT BE?
As a first-time home buyer, you are most likely going to be offered a first-time buyer mortgage rate of 95% or 90% deal. In other words, you are going to have to put down 5% to 10%. With that said, if you want to make your deposit higher, that will be to your advantage. First-time buyer mortgage rates lower if you put down more than 10% of the property value.
Interest rates are lower the more money you put down on the house because that means you are less risk to the lender. Be able to put down at least 10% or more to make paying back your mortgage way easier.
CAN SOMEONE GIFT ME MY DEPOSIT?
Yes. This process is called a gifted deposit. A gifted deposit is when someone gives you the money to put down the deposit, however, they have zero rights to the property. They are simply giving you the money so you can buy the property. When someone gifts you a deposit, you also don’t have to pay that loan back.