What’s a mortgage deposit?

If you require a mortgage to purchase a home, it’s likely that you’ll need to put down a deposit. This is a lump sum that you pay upfront, letting you own part of the property outright. The rest of the agreed sale price can be paid by a mortgage, which is a loan that can be repaid in instalments. A deposit can give the seller reassurance that you’re serious about purchasing the property.

The deposit amount that you’ll have to pay depends on a number of factors. The larger your deposit, the better a deal you may get on your mortgage – this is because lenders are more likely to believe that you’ll meet your mortgage repayments.

What’s Loan to value (LTV)?

Your LTV is the percentage of your property that is mortgaged, compared the overall value of your home. The lower your LTV, the larger the proportion that you already own. On the other hand, the higher your LTV, the less of the property that is already yours – this makes you a riskier prospect to the lender, and could mean that you’ll get a worse deal on a mortgage than if you had a lower LTV.

Before applying for a mortgage

If you don’t have enough funds for a mortgage deposit, you may want to consider saving for it before you agree to purchase a home. You can also check your Equifax Credit Report & Score in preparation for applying for a mortgage. It’s free for the first 30 days, then £7.95 monthly, and provides you with your credit history as well as an indication of how creditworthy a lender may find you, so that you can see if you need to take any steps to get credit-ready and improve your credit rating before applying for a mortgage.

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