What Is the Average First-Time Buyer Deposit in London

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What Is the Average First-Time Buyer Deposit in London
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House deposits play a big role when buying a house with a mortgage. So, getting your deposit right is key both when it comes to securing a good mortgage deal and being able to afford your dream home.

If you lack any practical experience when it comes to house deposits in London, read this article until the very end. In the next 10 minutes, we’re going to go over:

  • What the average house deposit in London is
  • What is a good % for a house deposit
  • How to decide how much deposit you should put down
  • Whether or not you can buy a house in London with a £50k, £40k, or £30k deposit

But before we do any of that, let’s first take a look at what the average property price in London currently is. At the end of the day, the amount of deposit you’ll need will be heavily influenced by the price of the property you want to buy.

The Average Property Price in London

Over the last 12 months, the average property in London sold for £718,511. Flats came out to be the most affordable, averaging at around £528,000 while detached, semi-detached and terraced properties cost on average £1.3m, £808,000, and £796,000, respectively.

Please note that these are the average property prices by type across the entirety of London. If you want to live in a more affluent area, the average prices per property type will go up. And if you want to settle in a less popular part of town, the averages will drop.

What is the Average Deposit for a House in London

According to Zoopla, the average first-time buyer property price in London was around £425,000 with an average deposit of £144,500. In contrast to the property price, the average first-time buyer put down a deposit of 33.99%.

This statistic might come as a shock, but it’s a fact that Londoners are putting down a significantly higher deposit on their properties compared to the rest of the UK.

This is likely due to the sky-high property prices in London. And truthfully, if you don’t put down a significant chunk of money as a deposit, you will have a very large monthly mortgage payment to cover, especially if you buy a more expensive property.

What is a Good % Deposit for a House in London?

Generally speaking, between 15% and 20% of the total property value is a good amount to aim for. Such a deposit will not only massively reduce your monthly mortgage payments, but you’ll also be able to get a good mortgage deal with decent interest. So, if you want to buy a property in London for £500,000, it’s advised that you have a deposit of between £75,000 and £100,000.

How to Decide on How Much Deposit to Put Down as a First-Time Buyer?

As a first-time buyer, deciding exactly how much money you want to put down as a deposit can be quite tricky and nerve-wracking. To give you a sense of direction, here are some things to consider that will help you decide on the amount of money you want to put down as your deposit.

Assess Your Finances

The first step you want to take is to assess your current financial situation. When doing so, consider your income, monthly expenses, and any outstanding debts such as car loans and others. Once you have done all of the maths, it’s time to move on to the next step.

Determine Your Target Home Price

When shopping for a property, it’s crucial that you set a budget that fits your financial abilities. Doing so will prevent you from being intrigued by properties that you can’t afford. The last thing you want to do is purchase a more expensive property you love that later becomes a financial burden you can’t afford.

Understand Your Lender’s Requirements

Depending on the lender you choose for your mortgage, they’ll have a certain minimum deposit that you’ll have to meet. While some lenders would be happy to accept a 5% deposit, others are keen on getting a minimum of 10% or even 20% upfront. So, before you take any steps forward, do your research and settle for a lender that works for you.

Calculate the Minimum Deposit Necessary

Once you know your lender’s requirements, it’s time to calculate the minimum deposit necessary to get the property that you want. Generally speaking, it’s best to aim for around 20% of the property’s value. So, if you’re considering buying a property for £750,000, a 20% deposit would be £150,000.

Consider Your Long-Term Goals

Getting a mortgage is a long-term financial decision. So, before you sign the documents, it’s crucial to consider your long-term goals and what you want to achieve. If you want to have more spare money at the end of each month, putting down a larger deposit is a good idea, as your monthly premium will be lower.

Evaluate the Risk You Are Willing to Take

If you’re happy with taking on some extra risk, you can opt for a lower deposit. Please note that if you were to take this route, your monthly premiums would be higher as you’ll have more money to pay off.

Can You Buy a House in London With a 50K/40K/30K Deposit?

That would depend on the price of the property you’re looking at buying and what percentage of the total property value you want to put down as a deposit. If you want to do the bare minimum of a deposit, which is typically around 5%, then a £30,000 deposit will be enough for a £600,000 property.

With that said, ideally, you don’t want to put down a 5% deposit as you won’t be able to get access to good mortgage rates, meaning your monthly premium will be quite high. So, if we were to stick to the 20/80 rule, a 20% deposit that totals £30k, £40k, or £50k will mean that you can afford a property in the area of £150,000, £200,000, or £250,000.

Considering that you are buying a property in London, where property prices are almost double those in other parts of the UK, buying a house with such a deposit is not impossible, but it can be tricky. This is especially true if you’re looking at purchasing a property in one of the better parts of London.

One way you can find a property that would meet your budget for a deposit is to look at people looking to sell their house fast off the market. They are typically more likely to settle for a little less if you can reassure them that you’re happy to move forward quickly.

Buying your first home in London can be a daunting experience. And rightfully so. You’re about to sign for a multi-decade mortgage that’ll likely be worth hundreds of thousands of pounds that you’ll need to pay off. Fortunately, getting a mortgage doesn’t have to be scary, and one way to lower your stress during the process is to get a deposit that works for you.

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