It can be difficult to know exactly how much of a mortgage deposit you should save up. There are different ways that you can work out and it is good to think about all of these and then use them jointly as a way to decide how much to save.
How Much the Lender Wants
It is a good idea to have a look at different mortgages and see how much money the lender is likely to want from you. You may find that most mortgages are fairly similar and it is likely that you will need a deposit of around 10% of the house price. It is good to check this though, particularly if you have a specific lender in mind. Then you will be able to start planning better as to how much you will need to save. You should be able to get a total in mind.
How Much the Property is Worth
You will also need to think about how much the home that you are likely to want to buy will be worth. It is good to take a look at the current property market and see how much different places are selling for and this will enable you to be able to get an idea of how much a home will be that you might like to buy.
Armed with this you should be able to work out a figure as to how much you will need to aim for with your savings as to how much the lump sum will need to be. Now you will have to figure out how long it will take you to get it.
How Much you can Afford
You will need to have a think about how much money you will be able to afford to save each month. It is important to try to save as much as you can, but you will have other things that you will need to pay for as well. Therefore, it is a good idea to note down all of those things that you will need to pay for and then add them up. Then you can take that total away from the money that you have coming in each month and you will see how much you have left to save. Of course, you can change the amount that you are spending by buying less things or cheaper things and that could help you to spend less money and have even more available to save. You may also need to consider finding a way to earn some extra money if you want to save up more quickly.
It is always a good idea to try to find a way to save a bit more deposit than you have to. Unless the house of your dreams is within touching distance, then it can be better to delay buying and save up a bit more money. This will allow you to be able to take on a smaller mortgage. The advantage of this is that the mortgage will be cheaper because you will borrow less and therefore pay less interest as interest is charged as a percentage pf the amount that you borrow, so the more you borrow, the more interest you have to pay. Therefore, if you can save up extra money then you will save money in the long run and so it can be wise to put forward more than the minimum amount towards the deposit. This is something that is allowed and could make a huge difference. It could mean that you can pay lower repayments each month which will make them easier to manage or you can repay it over a shorter time and pay it off more quickly.Read More