What can you afford? - Getting a mortgage - First time buyer

How to save for a house deposit

5 min read

Saving up the deposit is often the toughest part of getting onto the property ladder. Read our top tips on how to save up for your deposit, what a deposit is, and how it works.

  • Arti Dhamu, Move Specialist at My Home Move Conveyancing
    Arti Dhamu

    Move Specialist

    Published January 25th 2024

millennial couple managing expenses on laptop to figure out how to best save for a deposit to buy their first home

If you’re looking to buy your first house, then you’re probably aware that you need to save for a house deposit. Saving a chunk of cash is often the toughest part of getting onto the property ladder. However, there are ways you can boost your savings, without having to cut out too much of the things you enjoy. First though, we explain what a deposit is, and how it works.

What is a deposit?

When buying property, you'll need to put down part of the total purchase price upfront and use a mortgage for the remaining amount. A deposit is the upfront cash payment that you put down.

How much do you need for a deposit?

The standard amount to put down as a deposit is usually between 5%-20% of the property’s value. The bigger deposit you put down, the lower your the loan-to-value (LTV) ratio will be on your mortgage. Therefore, the higher your deposit, the better interest rate (and therefore lower repayments) you can get. This is because you’re seen as less of a risk to a lender, as you’ll own more of the property from the start of your mortgage.

Deposit calculation examples

  • If you’re looking to buy a flat for £160,000: with a 5% deposit you will need savings of £8,000, with a 10% deposit you will need savings of £16,000 and with a 20% deposit you will need savings of £32,000.

  • If you’re looking to buy a house for £250,000: with a 5% deposit you will need savings of £12,500, with a 10% deposit you will need savings of £25,000 and with a 20% deposit you will need savings of £50,000.

  • If you’re looking to buy a house for £450,000: with a 5% deposit you will need savings of £22,500, with a 10% deposit you will need savings of £45,000 and with a 20% deposit you will need savings of £90,000.

Tips to help save up for a deposit

Set yourself a budget

There can be a real art and discipline to saving, however, the best way to see your pile of cash grow is to save a set amount each month. You should set yourself a figure that’s comfortable enough for you to commit to saving each month, without putting too much pressure on yourself.

So, for example, let’s say you need £12,000 for your deposit. Saving around £330 a month will see you reach your target in around three years. If that sounds like too much, you could aim to buy in four years by saving £250 a month.

When you start saving, pick the best savings account you can, with the highest interest rate possible, and set up a monthly direct debit or standing order. Remember you can always make extra payments or increase your monthly amount if you come into some money or get a promotion at work.

Open a Lifetime ISA

A Lifetime ISA (LISA) is government scheme that’s aimed at people saving for either their first house or their retirement.

If you’re aged between 18 and 40, you can save up to £4,000 a year into a LISA while getting a government bonus of 25% bonus on top (up to £1,000 a year if you save the maximum amount).

You can claim the bonus each year until you’re 50, however you’ll have to pay a 25% charge if you withdraw money before you’re 60, or if you use it for anything other than buying your first home, unless you’re terminally ill.

There are other government schemes for help getting onto the property ladder, learn more about these help to buy schemes.

Cut your monthly outgoings

Whether you’re partial to dining out in fancy restaurants or sipping cocktails in upmarket bars, there are lots of ways you can bring down your outgoings.

Shunning restaurants and takeaways in favour of cooking your own meals is a sure-fire way to save some cash. The same goes for inviting some friends round to your house rather than going on a night out or limiting your daily coffee intake to just the one cup before you leave for work in the morning.

Can you make your own lunch, do without the odd luxury item at the supermarket, or hold off on upgrading your phone or even car for now? Take a look at your own personal spending habits and you could quickly save a large amount.

Reduce the cost of rent

If you’re paying out a small fortune on rent and bills each month, the amount you save by reducing the cost of rent will quickly add up after a couple of months. You could either look to move to a cheaper rental property, or move in with friends or family.

Although the thought of moving back into your family home may fill you with dread, spending a few months with cheaper or no rent, could give you a crucial boost as you save up for your deposit. If you’re really lucky, you may even get a few home cooked meals out of it, or discover your dirty clothes magically appear washed and dried back in your room.

Do you always need a deposit?

The only exception to needing a deposit is when you have a 0% LTV mortgage. These are fairly rare though and can be tough to get, especially as a first-time buyer. Read our guide which explains the different types of mortgages.

When do you pay the deposit?

You pay your deposit when you exchange contracts, therefore you'll need to have enough to cover both this and the other fees you’ll face.

What other fees are there when buying a house?

If you’re a first-time buyer, there may be certain fees you haven’t come across yet in the home buying process. One of these is Stamp Duty Land Tax (SDLT), although as a first-time buyer, you’re exempt on paying this under certain circumstances You’ll also have conveyancing fees, a payment to the land registry, and fees for searches and surveys to cover, so you’re probably after some advice on how to save for it all

After some more home buying advice?

If you’re looking for some more information on the house buying process, take a look at our handy first-time buyers guide. Or watch our short video to find out more about what’s involved in the conveyancing process.

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