Could a smaller deposit mean a cheaper mortgage?

Looking at the overall costs of a mortgage is imperative to make certain you have the best all-round deal.

However, as mortgage rates are so low and competition is fierce, working out which mortgage represents the best value can be very complex indeed. This is when it pays dividends to secure the services of independent mortgage broker, Deal Direct.

In general, until now, the larger the deposit, the cheaper the mortgage, but this may no longer be the case. Having a smaller deposit of 5 - 10% could mean securing a cheaper deal than if you had a larger deposit of between 25 - 40%.

Following the recent reports of an increase in house prices, plus the rise in inflation exceeding expectations, lenders are aware of how difficult it can be for FTB’s to take the initial step onto the housing ladder. Consequently, competition between lenders has increased.

In addition to offering a low mortgage rate, lenders may also offer an incentive package which, when factored into the entire deal, means low monthly repayments. It could be, therefore, that repayment levels for a 95% LTV fixed rate mortgage work out to be cheaper than a 70% LTV fixed rate mortgage.

If you are a borrower with a larger deposit, what are your alternatives?

Overpaying your mortgage could be a solution. The interest rate you pay may not change but the length of the mortgage term could be reduced enough to make a significant difference to the amount you pay overall.

To determine which mortgage option, from the wealth of variations available on the market, represents the best all-round value, contact a Deal Direct adviser.

For independent mortgage advice, call 0800 048 8828.