20% or 25% deposit - mortgage co preference?

Too_Hairy_Husky

My basic question is: do mortgage companies look preferably on people who have a bigger deposit?

We have had an offer accepted on the house we currently rent (that's a whole different thread!) of £275,000 and have the £68,750 necessary to give us a 25% deposit. L&C say that the remaining amount is "affordable" for mortgage purposes. We can just about scrape the stamp duty together too!

Now... the house needs work - it's a rental - it's lovely but could be lovelier! So if we were to withhold some of the money and drop down to a 20% deposit and it still proved to be affordable, would the mortgage people still look on it favorably?

An odd question I know - but I honestly don't know if it's a person that looks at the paperwork or they simply feed the numbers in to a calculator in which case as long as X+Y=Z they probably wont care either way!!!

argomatt

Having a larger deposit can enable you to get a better rate of interest for your mortgage.

It depends on where the lenders bands lie, you might be better off using all of the savings as a deposit, getting a better interest rate, then using the money you save on each monthly payments to save up and fund the renovation work you want to do.

Or it could be the interest rate change from 20% deposit to 25% deposit is negligible, then you are probably better off keeping some money back for the improvements, providing the repayments are still affordable.

On my mortgage I had a 35% deposit available, but used 30% which was needed to get the interest rate I wanted, and I have been able to keep some money back for improvements.