First-Time Buyers Guide to Saving For a House Deposit
When preparing to buy your first home, saving for a deposit can be a difficult process. As house prices, inflation and the cost of living increases, it can be challenging trying to save a large sum of money. It’s also important to consider all the other costs that are involved in buying a property – conveyancing, legal fees, insurance policies and moving to name a few.
How much do I need to save?
A 5% deposit of the property value is the minimum amount you are able put down, however your options may be limited. The larger deposit you can provide, the less risk you will be considered to lenders and better rates will be available to you.
Where do I start?
Set a savings goal, which you can break down into easier amounts and a time frame to achieve it. Regular saving is most effective and it’s important to be realistic about how much you can save monthly so that it’s more attainable and doesn’t feel like such a chore or impact your life severely. Researching house prices in the area you would like to buy your property and using mortgage borrowing calculators online can help you work out how much you may need to save.
Savings accounts options
There are many ways of saving for your deposit. Look around and think about what you want to achieve and how quickly. With a Lifetime ISA (LISA), if you’re a first-time buyer under 40, you get a 25% bonus on your savings. For example, you can deposit up to £4,000 each tax year and receive a government bonus of £1,000 on top, meaning you would have £5,000 at the end of the tax year. It could help you reach your deposit goal quicker.
Top tips on how to build your savings:
- Set up a savings account – Look into a suitable ISA and consider a Lifetime ISA.
- Look at your current spending habits –See where you can possibly reduce your monthly bills and expenditure (e.g. minimise unused subscriptions/gym membership, change energy or network providers, eating out, daily coffees etc.) to save money.
- Create a budget and stick to it – Make the budget realistic so it’s easier to stick to and when you struggle, remember the goal in mind. Set up standing orders so the money is automatically allocated to savings before you have chance to spend it.
- Reduce your rent/living costs – If possible, consider moving in with family, friends or find cheaper/shared accommodation which can allow you to save money quicker.
- Make extra money – Sell clothes or items online that you don’t need, or if you have a skill/talent/craft that you can turn into a business, this can help you earn extra cash.
- Make use of discounts, vouchers and online deals – Every little saving helps.
- Try “no spend” months or weekends” – Only pay your bills, regular outgoings and necessities and move the money you save to your savings. Consider alternative free activities.
- Set limits – If it helps, take out a certain amount of money in cash for the week or month and leave your cards at home.
- Consider investing options – Including saving accounts with higher interest rates such as stocks and shares ISAs.
- Ask for help and advice – From friends and family for support and we’re here for any financial advice you may need.
We’re here to help you save or invest your money to build your deposit. We will make sure your savings and investments are working for you and advise you on how much you can borrow for a mortgage. We’ll also be here to help find the right mortgage deal when you are ready to buy your first home!
If you would like to find out more, please get in touch with us.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Key Takeaways:
- A 5% deposit of the property value is the minimum you can put down.
- Set yourself a savings goal, which you can break down into easier amounts and a time frame to achieve it.
- With a Lifetime ISA (LISA) as a first-time buyer under 40, you get a 25% bonus on your savings.
- YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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