Getting the money together

Do I need a deposit?

The size of the deposit you can afford to put down will influence your choice of mortgage lender and the type of mortgage available to you. 

All lenders have rules on the maximum loan to value (LTV) they will offer - that is, the most they'll lend as a percentage of the property value. Many limit lending 80% to 95% LTV, meaning you need to have between 5% to 20% of the purchase price to put down as a deposit.

Percentage House Price Deposit examples:

5% £150,000               = £7,500

10% £150,000             = £15,000

15% £150,000             = £22,500

20% £150,000             = £30,000

How much can I borrow?

This will depend on the size of your deposit, how much you earn and what amount you can afford to repay each month.

Many lenders will use some form of affordability calculation to weigh up your income against your outgoings. However, as a general rule of thumb, many lenders use income multiples; which means they will usually lend you up to three or perhaps four times your annual income if you are buying a property alone.

If you are buying your home as a couple, then you can hope to get either three times the first income plus one year of the second income, or two-and-a-half times your joint income.

If you're getting the money together for your first home by yourself, you may want to consider some of the following options:

• Help from your parents or a close relative.
• Buying with a friend or friends.
• Entering a shared ownership or shared equity scheme with a third party, such as your Local Authority who will pay a percentage of the value to make it more affordable.
• A parent or a family member guaranteeing your mortgage so you can borrow more, (But they need to make sure they know what they are entering into.)
• A Graduate package, where lenders will often offer higher income multiples on the basis that they expect your earning capacity to increase in the near future.

Whichever option you go for, be careful not to over-commit yourself and bear in mind there may be times when money suddenly becomes unexpectedly tight.

When you get your Mortgage Guarantee from your lender, show it to the estate agent as proof of intent to buy the property you are interested in.