If you want to take out a mortgage then you will need a deposit. Banks usually will ask borrowers to put forward a deposit so that they do not have to lend the full value of the property and it shows that the borrowers are capable of budgeting. There is usually a minimum deposit such as five or ten percent of the amount you are borrowing but there is no maximum amount, meaning that you can put extra money towards it. There are advantages and disadvantages of doing this.
Lower loan amount
Borrowing less money has many advantages. It means that the cost of the loan will be lower because you are not paying to borrow so much money. A mortgage can have a really high cost because you are borrowing so much money for such a long time and so it can be good to do what you can to reduce the cost. Although the house you are buying with the money will tend to increase in value and therefore it may seem okay to spend a lot on interest, it is better to spend as little as you can so that you can save money. Owing less money can also feel better as having a large loan can be more stressful than a smaller one. You may also be able to borrow more money in the future, if you need to, if you do not borrow as much now,
Smaller repayments or can borrow for less time
Borrowing less means that you will have to repay less money. This means that you can either repay the loan back more quickly or you can repay it over the same period of time but have smaller repayments to make. You may be able to choose between these two options or it may be that your lender will offer you just one option. This will depend on the lender. Both of these options can be good as you will either get the loan paid off more quickly or you will have more money each month as you have lower outgoings.
Less money each month
If you pay out a large deposit then you will not have any savings to fall back on. This could mean that each month you have less money available to spend as you will not have any extra. If you need extra money then you may have to borrow it instead and perhaps go overdrawn or use a credit card and this could be expensive. Therefore you will need to either be very careful with your budgeting or perhaps make your deposit a bit smaller so that you have some savings to fall back on.
Less spare money for other purchases
When you buy a house they are often things that you have to buy for it. It may be that the house needs complete renovation and you have to buy a lot of things. It is more common though that it will just need a few things done, perhaps decoration or new carpets, for example. You may find very little needs doing at all but you may still need to pay out for things like curtains and lamp shades. So even if the house looks ready to move into and you have lots of things, you will probably find that there will be some things you need to buy. If you have spent all of your spare money on a deposit then you could find that you will not be able to afford these things and you may have to borrow money to pay for them which is not ideal.
So although t saves a lot of money if you can save up a large deposit, it is wise to make sure that you also have some money left for yourself. Therefore when you are saving up, put some money in a savings account for you to use once you have moved as well as saving the deposit. Ideally you still want to save as much as possible and so if that means delaying the move, it could make sense. Of course, if you are paying rent and spending out more than you will if you buy a house and pay a mortgage, then you might decide to put down the minimum deposit and start saving money more quickly. Just make sure that you calculate all of the costs of the new house to ensure that you will save money. Look into the cost of the council tax, house insurance and also any increase in car insurance costs to ensure that it really will be cheaper and also how much cheaper it will be. Then calculate how much you may save if you pay a higher deposit and whether you will be better off waiting a bit longer.