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How long do I have to save to get a mortgage?

The average deposit size to get a mortgage is generally 20% of the property value, which means you will likely need somewhere between £20,000 and £50,000.

However, 90% mortgages and even 95% mortgages are still a possibility meaning you may only need to have a 10% or even 5% deposit. Nonetheless, saving for a deposit can take a lot of effort and time.

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Overall, it comes down to your circumstances: how much you currently have saved, what you can afford to save each month and how much help you can get from friends and family. There are other factors that could also come into play such as your credit score, the outcome of your mortgage affordability assessment, and whether you want to go down the route of using a government home buying scheme such as Help to Buy or Shared Ownership.

What do you need to get a mortgage?

In order to get a mortgage you will first and foremost need a cash deposit to pay upfront. The deposit is a percentage of the property value, usually around 20%. The mortgage would then cover the rest of the property value – usually around 80%.

However, there are different mortgages with a variety of Loan to Value (LTV) offers. The LTV is the amount of mortgage you need against the deposit you have. For example, if you want to buy a home valued at £200,000 and you have a deposit sum of £20,000, then you have a 10% deposit and will need a mortgage with a 90% LTV.

The higher the percentage of your deposit, the better your chances are of getting a cheaper deal on your mortgage.

What you need to get a mortgage:

  • A cash deposit to pay upfront
  • Proof of income
  • A good credit score
  • Pass the mortgage affordability assessment
  • Extra cash to pay for various legal and mortgage set up fees

Not all of these requirements apply to everyone nor to every mortgage, but they do significantly improve your chances and expand your options.

Income requirements

You will need to supply proof of income. If you are in full-time permanent work then it is common to only provide three months worth of payslips, but some mortgage providers and brokers may ask for less or more than this.

If you are self-employed or working as a freelancer then you may have trouble getting a mortgage from the high street lenders. You will likely need to show a whole year or even two years’ proof of income, including your final net profit after tax.

If you are unemployed then you may find that you have almost zero chance of getting a mortgage. Of course, there are other means of income beyond employment, but mortgage lenders are looking for borrowers to have a reliable source which they know you will be able to keep up monthly mortgage repayments with.

Having a large amount of income can also make up for a lower deposit. For example, if you can only provide a 5% deposit, a large income might be able to prove that you can still afford to pay off your larger mortgage.

Affordability criteria

Since the 2014 Mortgage Market Review all UK mortgage lenders have had to revise their practices and make affordability assessments stricter.

In order to get a mortgage your lender will have to first ‘stress test’ your current financial capabilities against the mortgage you are applying for. This involves checking how much debt you currently have and how much you regularly spend on bills, food, clothes, and even TV and gym subscriptions, or anything else that comes out of your bank account each month.

This is in addition to your proof of income and deposit, and helps the lender determine if you could still afford the monthly mortgage repayments even in a potential scenario of you losing your job suddenly or having to spend more money if interest rates were to rise, or if you had to look after a sick relative or prepare for a new baby.

To plan for the affordability assessment, do a budget and cancel any subscriptions you no longer use. Make an effort to clear all of your debts before putting in your mortgage application. All of these things can help enhance your application’s chances of being approved.

Minimum deposit

There is no specific rule for what the minimum amount needed for a deposit must be. Generally, most mortgages start at around the 80% LTV mark, meaning a 20% deposit will give you a good chance of seeing many of the deals available.

However, there are mortgages that offer an LTV as high as 95% – even 100% in some very rare cases (and should only be explored with extreme caution).

A bigger deposit is better, as it will help you get a cheaper mortgage deal and it will save you thousands of pounds in interest over the years.

Tips to save for a deposit

Look for a high interest savings account to put money into for your deposit. The best savings accounts usually have limited access, meaning you need to lock away your cash for a certain amount of time, usually a year or two. If you know you’re not planning to buy a home for that time and you can be disciplined enough to not take out that cash, then you could get a better rate.

Plan how long you need to save and when you will be able to afford a home – lock away your savings for that time to get better savings rates

  • Set up a Direct Debit from your bank account to your savings account for an amount that you can afford to put away each month
  • Ask family if they can help you with a one-off gift towards your deposit
  • Consider buying with a friend or relative to share the costs (but factor in how you will approach the situation if later on they decide they want to sell their share)

Getting cash from family can also help getting a bigger deposit, but make sure they understand the rules on inheritance tax as it could be counted as part of their ‘estate’ should they die within seven years after.

Why bigger deposits are better

Your deposit immediately pays for a portion of the property value. The more you pay as a deposit, the more equity you currently have in your home, which can really help you out if you ever need to borrow again or sell up.

It also means you have less mortgage interest to pay back. The interest on mortgages and most financial products is compounded, but on a mortgage you are paying the interest over a 25 year period, sometimes even longer. Essentially: the longer you pay, the more of it you pay. Anything you can do to reduce your interest payments will save you thousands of pounds in the long run.

Finally, a bigger deposit will open up your options when comparing mortgages. The mortgage market can be a tricky place to navigate, but with a higher deposit you will have many of the better options available to choose from.

Deposit boosting shortcuts

If you rent a council owned home or want to buy in the area you live or work in, you can take part in the Shared Ownership scheme. Shared Ownership allows you to buy a portion of the property, meaning you can put up a far smaller deposit and pay a smaller mortgage alongside rent.

There are also family assisted mortgages, which allow you to borrow from a relative and thus pay a 5% deposit or even less. But your relative then becomes responsible if you can no longer afford to pay the mortgage.

Other costs when getting a mortgage

There are several costs associated with buying a home, including the mortgage set up fees, legal fees and potentially Stamp Duty which applies to all homes over the value of £125,000.

These costs can quickly pile up during the home buying process so it is important that your deposit is not comprised of all of your savings. Leave some of your money behind to pay for the extra costs. You could end up needing somewhere between £2,000 and £5,000 – sometimes more – to cover all of the extra costs.

Can you borrow to get a mortgage?

You may have been able to use a credit card or a loan to make up some of your deposit, but under the new regulations, it is now highly unlikely, if not impossible to do.

Mortgage providers will check your current debt and if it is high enough to pay for a deposit, then they will simply not allow you to borrow more to buy a home.

Read more…

  • What do I need to apply for a mortgage? A mortgage application can be complicated, and requires several documents but as a minimum you will need provide evidence of income and outgoings as well as some identification.
  • How long does it take to get a mortgage? There is no definitive time you can expect to wait before you get a mortgage approved, each step throughout the process can range from taking a few minutes, to hours, or even several days.
  • Do you need a mortgage broker? Mortgage brokers are regulated and can usually offer free, impartial advice to help you find the best deal for you. But what are the drawbacks? And can you find a great mortgage deal yourself?

Compare first time buyer mortgages

Compare a huge range of first time buyer mortgages on our comparison tables

First time buyer mortgages