What Deposit Will I Need When Purchasing A Property?
Posted on 6th May 2020
At MG Legal, we understand that a property purchase will be one of the biggest purchases our valued clients may make in their lifetime. Therefore, we ask, why go anywhere else than the expertise of our property solicitors in Preston? We offer fixed fee services in all aspects of conveyancing, with no hidden extras! See more on our fees, here.
Getting the ball rolling can be tough, particularly when saving for that initial deposit. So, how much deposit will you need to save?
The deposit you pay, upon Exchange of Contracts, is calculated in accordance with the price at which you are purchasing. HM Land Registry house price data advises that, as of February 2020, the average house price in the UK is £230,332.00. See more on Land Registry Data online, here.
Usually, the standard conditions of the Contract (see more on the Contract for Sale, here) require a 10% deposit upon Exchange of Contracts, however, ever-growing developments within the world of conveyancing have seen the introduction of 95% mortgages. This, therefore, allows circumstances in which a 5% deposit would be required. This is something that you should discuss with your conveyancing solicitor from the outset, as the seller’s solicitor would need to be advised of this.
It is, of course, also important to consider how opting for a lesser deposit would affect your monthly repayments. The lower a deposit, the more interest that is attracted, therefore, there is a careful consideration to be had, as to whether a larger deposit can be saved in order to be offered a more attractive mortgage product. Many mortgage lenders do prefer a higher deposit, of 10%, which may mean that the options in terms of such mortgages may be limited.
The concern of the lender is that their security over the property, by way of the legal mortgage, is going to be protected, therefore, being able to facilitate the purchase with a larger deposit, provides the lender with more surety that monthly repayments will be adequately met. It seems, therefore, the higher the deposit that can be offered, the more attractive the mortgage and terms that may be offered by the lender. A good way to discover the options available to you, is to use an online mortgage calculator. Useful tools can be found here.
For one property, in Louisiana, America, a deposit would not be a concern to any prospective buyer, as the property is being offered completely free of charge, but what is the catch? Also known as the ‘Amityville Horror House’, the current owner is struggling to sell the property due to many local stories that it is haunted. The four bedroomed property, built in the 1930s, is said, by one previous resident, to be haunted by a family member that would stir pots when cooking was left unattended, and move the pots around.
The current owner is hopeful that the history of the property can remain, and is free of charge, for anyone to take on, with the ‘cute stories about it being haunted’. Our Preston solicitors are not sure that this would be our choice of words.
For the rest of us, however, deposits remain an important factor within the conveyancing process. From the outset of your purchase, your conveyancing solicitor will require evidence of proof of funds, for compliance and anti-money laundering purposes. If, therefore, you are a cash buyer, whilst there are no lender terms to satisfy, your property solicitor will still require evidence that the funds are available to facilitate the purchase, both in terms of deposit and the residual funds required.
The deposit does, of course, play an important role when it comes to Exchange of Contracts, also known as ‘the point of no return’. If you proceed with Exchanging Contracts, and later withdraw from the transaction, prior to the agreed Completion date, you run the risk of forfeiting the deposit, and the Contract being rescinded. See our Preston solicitors’ blog on Exchange of Contracts, and the legal implications in terms of your deposit beyond this point.
Where purchasing with the assistance of a mortgage, our Preston solicitors have formed a trusty checklist that you can use, when considering the best options for you.
- Do I need to move house now? If there is no urgent need to move house at this time, it may be beneficial to stay put, for the time being, and put in that extra effort to save for a slightly higher deposit, which may result in a more favourable position to be in when discussing mortgage products with the lender.
- What mortgage products are available to me? As you will be aware, mortgage lenders take into account a number of considerations when offering mortgage loans. It is, therefore, important to consider the market, and based upon your circumstances, and the deposit available, what products are available to you. We would advise taking the advice of your mortgage broker in this regard.
- Can I afford the monthly repayments? Being tied into a mortgage is a huge commitment and, therefore, you need to ensure that you will be able to meet the monthly repayments, and any interest thereon. The monthly amount can be dependent on number of things, including the amount borrowed. This brings us back to the deposit available which could work to reduce your monthly repayments, and the total amount you repay to the lender, in the long run.
We would, of course, always recommend taking the advice of your mortgage broker in such regard, and, once agreed on the best option for you, leave the legal work to us.
There is no ‘one size fits all’ when it comes to your individual circumstances and buying a property, and our team understand this. By using the above guide, you will, however, be better placed to make an informed decision as to what is best for you.
At MG Legal, your best interests, as our valued clients, are always at the forefront and, therefore, we are on hand to assist you with all of your conveyancing needs. If you are purchasing a property, and have a query in connection with deposits and purchase funds, contact us today, at firstname.lastname@example.org.
Alternatively, if you have any other conveyancing query, submit an online enquiry, where one of our local solicitors will be on hand and happy to assist you.
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