Saving for a deposit and all the extra costs that come with buying a home can feel overwhelming at times. We’re here to help.
1. Consider your options
The first step towards buying a home is to work out roughly how much you’ll need to save for a deposit. The deposit amount will vary depending on the type of mortgage you’re going apply for. Although the average first-time buyer puts down a 20% deposit on their first home, some lenders will accept as low as 5%, and the number of mortgages requiring a 10% deposit are on the rise.
Typically, the minimum deposit for a buy-to-let mortgage is 25% of the property’s value.
Keep in mind that the larger the deposit, the lower the interest rate is likely to be and the better chance you’ll have of being accepted for a mortgage.
Tip: Consider mortgage deals by true cost. This includes capital and interest repayments, fees, and incentives due over the initial period of the deal, and is a more effective way of comparing deals than looking for the lowest interest rate deal.
Remember, you’ll also need to make sure you have enough savings to cover additional costs like stamp duty, solicitor fees, property valuation, and surveys.
To be strategic about the way you save, you could consider the following options:
Ask your family for help
If they’re in the financial position to do so, you could seek assistance from ‘The Bank of Mum and Dad’ and get help with a deposit from parents or other family members in the form of a gifted deposit.
There’s also the option for them to contribute more formally via the mortgage lender or act as a guarantor, which means they’ll be liable for paying the mortgage if you can’t.
Use a government scheme
Shared Ownership is a government scheme that enables you to purchase 25% to 75% of your home, with the option to buy a larger share (or the whole property) later on. Going down the shared ownership route will reduce the size of your mortgage and deposit, but you’ll also have to pay some rent.
Help to Buy is a scheme available to first-time buyers who need a little help with their deposit. The home you want to buy must be newly built with a total value of up to £600,000.
With this scheme, the government lends the buyer money in the form of an equity loan towards a newly built property. To qualify for the Help to Buy government scheme, you need to meet certain criteria.
Buy with someone else
You could consider pooling your resources to buy a home with a friend or family member, but it’s important to establish how this would work if one of you decides to sell their share further down the line.
Use our mortgage calculator to see how much you could borrow alone or with someone else, based on your financial circumstances.