Advise on deposit.

[robyn]

I am a first time buyer and struggling to save up a decent deposit to buy my first house - can some advise me if a lender would accept an application for a high percentage mortgage on a house that's worth more that i'm paying for it (due to some desperate people willing to sell below current house values)

For example: House for sale for a £100,000 and the seller accepts an offer of £70,000, therfore i've got 30% equity in that house!

[brian]

No, I'm afraid I don't think that will happen - this is the danger of buying at present, that you would need the full £100k, but if things became adverse and you had to sell, and could only sell at £70k, you have negative equity of £30k.

Also, I remember a bank manager telling me that they consider repossession value to be 20% less than market value, so if your £100k home went on the market for £70k, didn;t sell, and had to go through repossessions, then the repossession value would be only £56k! So almost 50% of the value gone!

That's why banks are pushing for higher deposits, to force consumers to have a larger cushion against such losses, and thus help protect the bank.

[mortgage_advisor]

Hi Robyn,

One way around the problem of not having a deposit is to take advantage of one of the government's first time buyer schemes.

Some of these schemes enable you to purchase a house using an equity loan from the government as your deposit, and depending on the scheme and your circumstances this can be as much as 50% of the property.

It provides you with a deposit at a very low interest rate and also will enable you to take advantage of the better products offered by mortgage lenders at the lower loan to values.

If you want any further information on these schemes let me know.