How much deposit would I need?

CupcakeLisa

I am a first time buyer trying to get my finances in order. I am about a year away from being in a position to apply for a mortgage - two years if I want to be totally debt free.

I am just trying to work out exactly my minimum goal of savings I need for a deposit.

If I went for a 10% deposit is this based on house valuation or purchase price?

For example there is a flat near me on sale at fixed £74,995, valued at £80,000. Would I need £7500 or £8000

This is just an example and I am aiming for 15% min.

Based on our salary's a mortgage calculator on-line says we can borrow up to £92,000, I dont want to but if I needed to go to the top of the amount I could borrow I would need around £18000 deposit and could buy a house around £110000

Sorry if these are basic questions but I am just at the beginning of my research

AndyGuil

It is for the lower of the two. It is possible to have a valuation lower than the purchase price. The mortgage would still only be given on the lower of the two values. In your case £74, 995, if that is at least what the bank value it as.

dgtazzman

10% would be for the purchase amount, so in your example, of the £74,995...

CupcakeLisa

Ok so if a house is valued at £80k and I buy at £72k (basing this on one I have seen online)

I would still need £7200 despite purchase price being 10% less than value?

CupcakeLisa

Ok so if a house is valued at £80k and I buy at £72k (basing this on one I have seen online)

I would still need £7200 despite purchase price being 10% less than value?

AndyGuil

Yes for a 10% deposit mortgage you need £7, 200.

CupcakeLisa

Thanks, I understand now

kingstreet

If a lender offers a maximum of 90%, it's 90% of the lower or purchase price, or valuation.

The asking price has no part in this.

If you agree to pay £80,000, you'll be be applying for a mortgage of £72,000 with an £8,000 deposit.

However, if the lender's surveyor downvalues the property to (eg) £75,000 the lender will then lend 90% of the valuation, or £67,500.

You'd then have to renegotiate the price with the vendor, to get your deposit (£7,500) and mortgage (£67,500) down to total £75,000 or you'd have to increase your deposit to £12,500 to buy the property for £80,000 as you'd only get that £67,500 mortgage.

John1993_2

Susan1942 wrote: »

The problem is that I will need to loan them the deposit and am wondering if this will be around 10% or more than this.

This needs to be moved to a new thread, but, in the meanwhile...

The lending bank will not accept a loaned deposit. A deposit has to come from the applicant's own savings. If they reveal the source they will be rejected for the mortgage, if they keep it hidden they will be committing mortgage fraud, which can lead to jail.

Sorry to have to be so blunt, but these are the facts of the matter.

Susan1942

Thanks for that It would mean I would need to gift the money. Would that be acceptable?
Am moving the post to a new thread.

Sue

CupcakeLisa

kingstreet wrote: »

If a lender offers a maximum of 90%, it's 90% of the lower or purchase price, or valuation.

The asking price has no part in this.

If you agree to pay £80,000, you'll be be applying for a mortgage of £72,000 with an £8,000 deposit.

However, if the lender's surveyor downvalues the property to (eg) £75,000 the lender will then lend 90% of the valuation, or £67,500.

You'd then have to renegotiate the price with the vendor, to get your deposit (£7,500) and mortgage (£67,500) down to total £75,000 or you'd have to increase your deposit to £12,500 to buy the property for £80,000 as you'd only get that £67,500 mortgage.

So really the home report valuation is worthless.

Its the valuation that the bank do prior to approving the mortgage