nigel woollsey

Nigel Woollsey

Online Writer
Published: 29/03/2019

At a glance

  • Unless you are prepared to obtain a 100% mortgage – which are few and far between and typically require some kind of guarantor arrangement – you’ll need a deposit of at least 5% of the cost of your new home.
  • You’ll also need to consider additional costs such as legal fees and upfront mortgage fees.
  • Take advantage of personal savings allowances, tax allowances and bonuses through things like a cash ISA or a Help to Buy ISA.
  • Saving for a deposit is a long-term commitment – be sure that you are realistic about how much you can afford to set aside, and what your eventual goal needs to be.

Saving a deposit for a house or flat can seem a daunting task, particularly with house prices continuing to rise.

The Government's Help to Buy scheme definitely eased the strain on first-time buyers by increasing the amount of 95% loan-to-value (LTV) mortgages available, and even though the scheme has now closed, providers are still active in the sector. But even saving that 5% can require a lot of careful planning and self-control, so here are some pointers to help you along the way.

1. Research house prices for the type of property you want, in the area you want to buy in

Sounds like a simple place to start, right? Find out how much houses or flats are going for in the area you want to buy your first property. Keep an eye on these prices by using websites such as Rightmove or Zoopla. 

Once you've got an idea of current prices you'll know how much you'll need to save to get to that magic 5% mark. 

Buying a house or flat isn't just about the deposit, though. You'll need to think about other costs as well, such as legal fees, survey fees and any upfront mortgage fees. Look at current 95% mortgages and associated fees, and maybe even ask a local solicitor how much you might have to pay in legal fees. 

Total your deposit and the various fees/taxes and you'll have the amount you're going to need to save.

2. Take a long hard look at your budget

Sit down and itemise all the money you've got coming in and going out. How much can you afford to save every month? 

Remember that your end goal is a challenging one so you'll probably need to set a fair proportion of your monthly income towards saving. This might mean restricting the amount you spend on nights out, or on luxuries. 

At any rate, be sure the amount you can commit to isn't unrealistic. It's going to take a long time to save – and that's a long time to feel stressed and miserable! 

From what you can comfortably save, work out how long it will take to get to the figure you need. For example, if the amount you are trying to save is £9,000 and you can afford to save £300 per month, then you're looking at about 30 months – or 2½ years. 

Don't be put off by how long it takes – as the Chinese philosopher Lao Tzu once said, "A journey of a thousand miles must begin with a single step".

Plus, you don't know what's around the corner. You could come into some money, get a salary increase or a bonus – all these things could bring your dream of home ownership a little closer.

3. Find the best savings account and review it regularly

When saving for your first home you're going to need a savings account that allows you to contribute regularly to it. Getting the best interest rate is key, and one way you can really help yourself is by saving with a cash ISA. 

Each year you have an allowance of how much you can invest into an ISA. All interest you earn is tax-free, which means your savings are going to be working harder for you and getting you to your end goal sooner. Even with non-ISA accounts you can earn up to £1,000 per year in interest without paying tax (if you are a basic rate taxpayer), so these may be worth looking into as well.

You may also want to consider the Government-funded Help to Buy: ISA, where you'll be given a 25% top-up on the amount you save, provided you put the funds towards your first home. A Lifetime ISA could be another possibility – you again get the 25% Government bonus if you’re saving towards your first home (or retirement), but it’s worth pointing out that most of these accounts are stocks and shares versions rather than cash ISAs, so you’ll need to be prepared for the extra level of risk involved.

regular savings account could also be a good option, giving you the kick-start you need to reach your goals. But whatever savings account or cash ISA you go for, make sure to regularly review the rate, particularly if you've got a variable rate deal. Some accounts have a rate that is partly made up of a bonus, but this will normally fall away after 12 months, reducing the amount of interest you receive thereafter.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

person holding model house

At a glance

  • Unless you are prepared to obtain a 100% mortgage – which are few and far between and typically require some kind of guarantor arrangement – you’ll need a deposit of at least 5% of the cost of your new home.
  • You’ll also need to consider additional costs such as legal fees and upfront mortgage fees.
  • Take advantage of personal savings allowances, tax allowances and bonuses through things like a cash ISA or a Help to Buy ISA.
  • Saving for a deposit is a long-term commitment – be sure that you are realistic about how much you can afford to set aside, and what your eventual goal needs to be.

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