Some believe that bigger deposits on a mortgage mean lower mortgage payments each month. But this is not always the rule. A study by Moneyfacts indicates that lower deposits on a home under certain conditions can lead to lower monthly payments.

With a two year fixed rate mortgage a 25 percent deposit can get you an average mortgage rate of 2.01 percent. But with a 30 percent deposit the rate increases to 2.21 percent, which is an increase of 0.20 percent with the bigger deposit (Bar charts shown).

The scenario does not improve with even bigger deposits and the results hold even in the UK. For instance with a 150,000 home (British pounds) and a 35 percent deposit and average rate of 1.69 percent the payments will be around 613.00 British pounds. But change that to a 40 percent deposit and the payments are about 626.00 (British pounds).

Things are different for modest deposits. The larger your modest deposit is the lower your monthly mortgage payments can be. With an average rate of 4.06 percent (two year fixed rate) and a modest deposit of 5 percent, monthly payments will be around 797.00 (British pounds), but with a 10 percent deposit and a subsequent average rate of 2.74 that monthly payment reduces to around 691.00 (British pounds).

In any event the lower monthly payments will depend on getting the low rate that works best for you.

Key Takeaways:

• Big deposits equal better payment decisions that can be impactful
• Small deposits can mean savings and over time that adds up greatly
• Interest rates vary as per the deposit that is paid

“Moneyfacts found that the average mortgage rate on a two-year fixed rate for borrowers with a 25% deposit currently stands at 2.01%. However, buyers with a 30% deposit can only get an average rate of 2.21%.”

Read more: http://www.mirror.co.uk/money/how-smaller-deposit-can-actually-10023906