What is a Deposit?

In the Scottish property market, a deposit is the amount of money you pay upfront towards the full cost of a property, while your mortgage covers the rest.

We spoke to Steve Thomson from the Mortgage Advice Bureau to find out more.

Benefits of a bigger house deposit

The bigger your deposit, the smaller your loan and the lower your monthly payments. Additionally, as your deposit size increases, interest rates tend to decrease because it’s less risky for mortgage lenders. Your property agent and mortgage adviser can provide detailed advice on your budget and the current property market.

Typical deposit amounts

The deposit amount varies based on market conditions and the type of property. Generally, deposits range from 5% to 20% of the property’s purchase price.

Boosting your deposit

Saving more for a deposit means you need to borrow less and repay less interest. If you can save, calculate a monthly budget to determine what you can afford to save each month. Then, set up a standing order to transfer this amount to your savings when you get paid.

Increasing mortgage payments later

Most mortgages allow a 10% overpayment facility on your current monthly repayments. Exceeding this amount usually incurs an early repayment charge. Overpaying helps you pay off your mortgage balance quicker.

Schemes for first-time buyers

Scotland offers several government schemes to help first-time buyers under the Low-Cost Initiative for First-Time Buyers (LIFT), including the New Supply Shared Equity (NSSE) scheme and Shared Ownership schemes. Additionally, first-time buyers can benefit from ISAs and Land and Buildings Transaction Tax (LBTT) relief.

Fees associated with getting a mortgage

Different mortgage products may have an arrangement fee, sometimes up to £2,000. You can pay this fee upfront or add it to your monthly repayments, but adding it means you’ll pay interest on the fee. There may also be a fee for using a financial adviser. Additionally, a Clearing House Automated Payment System (CHAPS) fee is required to cover the lender’s costs for sending mortgage funds to your solicitor. You also need to pay conveyancing fees to the solicitor handling your property purchase.

Contact a TSPC solicitor estate agent today to start your home buying journey.