Saving a deposit for your first home
First-time buyers are saving for longer to afford their deposit, and with rising prices, we offer advice on how to get started.
How much do I need?
The bigger a deposit you have, the cheaper your mortgage will be.
Property prices vary widely depending on type, condition and area, however, Which? report that in recent years a 20% deposit has become the norm for first-time buyers.
Lloyds bank is quoted as revealing the average deposit sits at £33,211 in 2019 (and that's £110,182 in London!).
If you are struggling to save to that level, smaller deposits can be a viable option when paired with a generous first-time buyer mortgage rate. If you can afford to save a larger amount, though, the best value mortgages usually require a deposit of between 25%-40%.
The 95% LTV mortgage has seen a boost in recent years, and Lloyds have just announced their 100% mortgage - but only if a family member can back the loan by depositing 10% of the total value into a Lloyds savings account. The Bank of Mum and Dad is
You must also consider that buying a home incurs a host of additional costs, including stamp duty, legal fees, Land Registry and mortgage arrangement charges from your lender.
What practical things can I do?
- Set up a monthly standing order into a high-interest savings account - to go out the day of your pay and reduce the temptation to spend it.
- Identify areas for reducing costs - how much are you spending on non-essentials? Could some be cut? For example, if you buy your lunch every day, you're spending hundreds more than you need to.
- Switch brands to those that are more cost effective - every little does help for overall savings.
- Check out Which? 50 ways to save money.
What help is available?
Savings schemes like the Lifetime and Help to Buy ISAs let you make tax-free contributions to your savings, earn interest and be paid bonuses of 25% from the government on the money you pay in.
However, some restrictions do apply on how much you can put away at one time and when you can access the money without incurring high penalties.
Gifted deposits are another option and allow someone else, usually a member of your family, to pay part or all of your deposit through your lender. You could also consider a guarantor mortgage that would let a family member cover the cost of your repayments should you find yourself unable.