How to save for a Mortgage deposit

April 23rd, 2009 by admin · No Comments

Saving for a Mortgage deposit can be a daunting affair for most property buyers. Especially if you are a first time buyer, the process of saving for the deposit for your first property is even mofre important.

Deposit requirements can often scare off first-time property buyers. However you buyers need not be disappointed.

As the recent credit crunch continues, property buyers find themselves in a difficult situation. On the other hand house prices itslef are at one of their lowest level for many years. This provides an ideal opportunity for potential buyers to get on the housing ladder. On the contrary, mortgage lenders and loan providers are being very careful when it comes to lending and this has made obtaining mortgage to buy a property harder than ever. In some cases mortgage lenders are asking for deposits as high as 30 per cent.

Although lenders can be justified in their strict lending approach due to tougher economic conditions, it seems that the needs of first-time buyers have been completely overcooked. Research shows that many UK borrowers feel they have been left out from the mortgage market by lenders due to strict lending criteria. When asked what size deposit the average borrower would need to get access to a reasonable mortgage deal, about ten per cent felt they would require a deposit of at least 30 to 40 per cent, while almost 20 per cent felt their application will be unsuccessful with less than a 30 per cent deposit or down payment. In reality, the average deposit needed to get one of the current best buy mortgages is just under 22 per cent.

The credit crunch alonh with tough lending criteria has confused buyers about the mortgage options available to them. UK has been gripped by recession and gloom and this has led to an extremely pessimistic view of the mortgage market. In reality, while the lending criteria we have seen applied over the last few years are a thing of the past, there may well be options available to first time buyers.

Taking advice from experienced mortgage brokers can allow home buyers to find a suitable mortgage deal based on the interest rate and the down payment required.

Get saving

You will always have to save a part of deposit. Research by Abbey indicates that first-time buyers have remained steadfast throughout the trying economic conditions, with 38 per cent resolving to increase the rate at which they save towards a deposit in 2009. Of those without any form of deposit, 40 per cent have decided to start saving this year. Those who have already started saving intend to ramp up their monthly amount by an extra £203, while those getting the ball rolling aim to save £123 each month.

Homeownership is beginning to look like a much more realistic goal for thousands of first-time buyers who have clearly been keeping an eye on house prices. Building a deposit is no small task, but those who have chosen to start putting extra money away are clearly better prepared to make an offer on a property when they see their opportunity. Savers need to be aware that a large deposit will make it easier for them to be accepted for the best mortgage deal.”

Further proof that potential homeowners are not being put off trying to buy property comes in the shape of findings by the National Association of Estate Agents (NAEA) which reports that the proportion of first-time buyers looking to put a foot on the property ladder more than doubled in the first two weeks of 2009. Its figures revealed 22.5 per cent of registered buyers were first-time buyers, up from 10 per cent in December and 14.5 per cent in January 2008. The consumer confidence has thus begun to rise again.

Taken into account

Your focus should be to find the best home for your savings. As the Bank Base Rate has fallen to record levels, so too have the interest rates available on your savings. While it is always important to look in the narket for the best financial deal, don’t be too pre-occupied with trying to find the savings account with the best interest rate in the short term. Instead you should look one that will help your money grow over the long term.

You can also invest your savings in a notice account. These do not allow you to access your funds immediately, reducing the chance of you raiding your savings for an impulse buy. Perhaps the best home for your savings in the current climate is an individual savings account (ISA). You can choose between a simple cash ISA or a stocks and shares ISA which is dependant on fluctuations in the stock market. The main advantage of ISAs is the fact that they are tax free whereas other savings accounts are at the mercy of the taxman. If you are still unsure as to the best home for your savings, speak to an independent financial adviser who should be able to find a way to make your money work as hard as possible for you.

We do not know how long the current economic condition will last. If you can manage to put away some saving, you could be in a beneficial position to take advantage of lower property prices that lower today than they have been in years.