The property market can be a confusing and stressful place, especially for first time buyers. There are an array of questions that first time buyers inevitably have when it comes to taking the plunge and investing in a property but the most prevalent question seems to be: how much of a deposit do I need to secure my property?
There really is no size fits all when it comes to how much a person may need for a deposit on a property. An array of factors such as location, property type, the current market rates and so much more go into deciding the magic figure needed to get onto the property ladder.
Deposits are extremely significant and will definitely impact the mortgage you are able to secure and therefore your long-term finances and outgoings. The basic principle is that the bigger the deposit that you manage to have, the cheaper the mortgage deals you will be able to obtain. This is because the more money that you can put towards your house then the less you will be deemed as a ‘risk’ to your lender which is in itself a logical process. However, it can prove hard for first time buyers to find the deposit that presents them as a desirable candidate for a good mortgage. It appears that the magic number, and the number that will get you some of the best mortgage deals whilst still being somewhat attainable for a first time buyer, is 20% of the overall property price for your deposit. Therefore, if you were interested in a property that was on the market for £250,000 (which is just over the average property price in 2018, coming in at £226,906, in England according to GOV.UK) then you would need a deposit of £50,000. To some people this may seem insurmountable, to others it may seem a very reasonable goal but as I said in the beginning when it comes to deposits, especially for first time buyers, there is not a specific number that will suit everyone.
Getting together a first time deposit is a difficult task for most people, but first time buyers should not be put off if they cannot reach the magic 20%. The number of 90% and 95% mortgages on the market is on the rise; therefore if you meet the criteria set forward by the lender you could definitely still be eligible for a mortgage if you have a 10% or even a 5% deposit. And if the mortgages on offer for 5% and 10% deposits do not appeal to you, increasingly shared ownership with friends or parents and shared equity schemes are being utilised by buyers in order to accumulate deposits of between 25%-40% to access the best mortgages on the market.
You can also consider new government initiatives such as the Help to Buy scheme which allows buyers with a deposit of between 5%-20% to purchase a property using either special mortgage rates or using an interest free equity loan. This may not be the right choice for some people but it is positive to see that the government are making an effort to support first time buyers. Another way that the government is attempting to make the property market slightly more accessible is through their reforms on stamp duty. In 2017 it was announced that government was going to abolish stamp duty for first time buyers with a property value of up to £300,000 immediately in England and Northern Ireland, with Wales following in March 2018. Therefore it was predicted that 95% of first-time buyers would see stamp duty cut and a staggering 80% would pay none at all.
Deposits are tricky and you’re certainly not going to get comparable figures from a property in London compared to a similar property in Liverpool but there are ways to navigate them successfully as a first time buyer. Ultimately the more of a deposit that you can put forward the better deal you are going to get but there are other ways to get your foot onto the property ladder. Deposits are wide-ranging and diverse so be sure to utilise the one that is best for you. Think of the long-term, do your research and hopefully you can be well on your way to securing your first property.
Written by Rachael Gray.
Rachael Gray is a Director at Clifton Gray specialist property recruitment company.
Rachael has recruited within the residential property industry for fifteen years. Follow Rachael on linkedin or email rachael@cliftongray.co.uk to discuss current Liverpool and Manchester property jobs, or to find out how Clifton Gray can secure the best talent for your property business.
To find out about new property jobs in Manchester or Liverpool, or if you are an employer wishing to seek talented property industry professionals, contact Clifton Gray to find out how we can support you with this.