The property landscape for first-time buyers can sometimes be a challenging one. Most will need to spend some time saving up a mortgage deposit in order to secure a property that suits their requirements.
Being a first-time buyer does also come with its advantages, as you are purchasing from a chain-free position. This means that your buying position isn't dependent on you selling a property of your own.
So, with a mortgage in principle organised and a good deposit that covers at least the minimum percentage required, you can go from first-time buyer to homeowner in a reasonable amount of time.
In this guide, we'll be covering four key areas with tips for saving for a house deposit which will give you the buying power you need to get onto the property ladder. We'll also be answering some of the most common questions you might have about saving for a house, so you can feel confident going into your savings journey.
What's the best way to save for a house deposit with a savings account?
What's the best way to save for a house deposit with a savings account?
If you're looking for the best way to save money for a house using regular savings, then picking up a lifetime ISA is something you should do.
These savings products are designed to do one of two things:
- Help first-time buyers save for a deposit (taking over from Help to Buy ISAs)
- Give people an alternative way to save for their retirement
The biggest benefit of using a LISA over other savings accounts is the additional funds which the state will contribute over each year. Couples looking to buy together can each make use of separate Lifetime ISAs and put them toward the same property purchase.
You can save up to £4,000 over 12 months in whatever size deposits you wish. This is easier than what the Help to Buy ISA offered, which had a cap on how much could be deposited each month.
Whatever you save within your ISA up to the £4,000 limit, the government will add a 25% bonus on top. For example, if you're able to save £4,000 a year, then the government will add £1,000 on top of this. As an ISA account, whatever interest is earned on these savings is tax-free.
For those who can save a portion of their income each month, using a Lifetime ISA can make your savings go further. It's important to remember that once your money is in this account, there's a fee for withdrawing it for anything other than its main two uses. So, you need to be sure that whatever you save isn't detrimental to your financial position.
What if I'm saving to buy a house in the next year?
If you're looking for how to save for a house deposit in a year, a LISA might not be for you. Due to the cap on savings, it is unlikely that £4,000 would be enough to meet the minimum deposit. However, other ISAs on the market can allow you to save up to £20,000 tax-free in a year. If you feel you could save a substantial amount within that time, this could be a better option.
Can I try saving money for a house with someone else?
Can I try saving money for a house with someone else?
Two heads are better than one. And two incomes and savings are much better than one. If you and your significant other are looking to purchase your first home together, then you can combine your deposits. Joint mortgage applications can also see your potential borrowing amount increase considerably, allowing you to purchase your ideal home.
Investing with a friend is also a common and very practical way to get on the property ladder. However, this can come with a more complex relationship with your friend. Set some ground rules before you start saving to buy a house with a friend and only get into this arrangement with a friend you fully trust. You should also talk frankly with a lawyer to draw up an agreement that sorts out any potential issues down the road. If you're thinking of buying a house with a friend or significant other, we also recommend reading our guide to being “joint tenants” or “tenants in common” and the associated legal implications.
How to save a deposit with another person
When saving for a house alongside someone else, you can decide what your savings goals should be and how you want to approach saving. There's the choice between each saving the same amount within a joint account, keeping your savings separate, or simply bringing together what savings you already have.
By combining your savings with someone else, you will maximise your deposit amount. This can give you the financial position to buy a bigger or better home, as well as potentially making your offer more appealing.
Agreeing to contribute the same amount to savings and have nearly identical deposits to combine can help prevent issues later on. If one person has contributed a significantly greater amount than the other, there's potential for resentment to build if problems arise.
Just remember that when you start saving deposit funds with someone else, your finances will then become intertwined. This is even more important when you proceed to purchase with another person. You will be locked into your property as a pair, so ensure your relationship is trusting and stable.
How can I save for a deposit while renting?
How can I save for a deposit while renting?
Many people will look to renting as a way of living independently whilst saving a deposit. It can allow you to experience living in new places while slowly accruing savings in order to buy somewhere. The main issue is that rent can eat into the income you would otherwise want to be putting towards your savings.
This is where people will typically look toward budget planners in order to minimise their outgoings. By reducing the number of unnecessary expenses in their life, people can redirect that money into savings. There's also the option to switch out your shopping for cheaper alternatives, reduce the number of monthly subscriptions you have, and cut back on luxury spending - every little bit for your savings deposit adds up!
You could also consider moving into a cheaper rental property for a set amount of time if you're getting closer to your savings goal. The reduced monthly rent can give you a boost to your savings and get you across the line that bit faster. Once your goal has been met, you can put your plans for purchasing your first home in motion.
Saving money for a house you're already renting
There can also sometimes be room to buy the place you're renting if you like living there. Sometimes landlords are looking to liquidate part of their assets and could be willing to sell you the property. Provided you've had a positive relationship with them as a tenant, they could be willing to sell your rented home to you.
Check out what similar properties are selling for locally and if it's in your price range, then sound the landlord out about the possibility of buying. You can agree on a potential price and work out your required deposit from there. A big plus is that you're already living there and won't have to move, saving cash on moving and other fees as this would be a private sale.
From there, you can start to adjust your savings each month and cut back on certain areas as you have a tangible goal to work towards. If the landlord is happy to wait until you've raised the necessary capital to do it, this can be less stressful than rapidly raising a deposit for a house that has just come onto the market.
How can I increase my saving for a deposit on a house?
How can I increase my saving for a deposit on a house?
Much like when you're renting, you will want to start by looking over your monthly outgoings. If buying a property is a priority for you, then there may be things you want to cut out completely. Takeaways and nights out would be considered luxuries, but you can substitute things within your lifestyle for money-saving alternatives, such as upgrading your home-cooked meals or limiting what you buy when out.
Many of us have multiple subscription services running within our lives - Amazon Prime, Netflix, gym memberships, etc. Some offer the ability to drop down a tier, meaning it's possible to access many of the benefits at a lower price.
If you've already reviewed your monthly spending to see where you can save money, the next port of call could be to bolster your income somehow.
When you want to save as much as possible for your deposit, especially if your ideal first-time property would be relatively expensive, then you might want to consider how to get additional funds.
Many people have jobs that could be suitable for freelance work. This can give you an extra revenue stream which you can add directly into your savings. There are plenty of websites where you can post your skills as a freelancer and take on what work you feel would be best.
You could also sell items you no longer use online using local listing sites. Not only can this free up space in your home and help with decluttering, but you can also make money whilst doing it. Depending on the items, there's potential for you to add months' worth of savings to your deposit fund.
Common questions on house deposits
How long does it take to save for a house?
The length of time required to save for a deposit will vary depending on what properties you are looking for. Many factors go into deciding the value of a property, including:
- The type of the property (freehold or leasehold)
- The size of the property
- The location of the property
- The amenities in the surrounding location
Conducting some research can give you an idea of the average price you'd need to pay for the sort of property you'd want. You'll also want to look at different mortgage products if you intend to borrow money to support your purchase.
There will nearly always be a minimum deposit required for a property as mortgages will usually require a 10% deposit - although there have been cases where this has dropped to 5%. The catch is that you need to ensure you can afford to borrow enough to cover the rest of the purchase.
So, look at how much lenders would be willing to lend you, match this against the average value of the properties you'd be interested in, and you can see how much you'd need to save. From there, you can plan how much you can save per month or per year to figure out how long that would take.
How much should I save for a house?
This will depend on the type of home you're looking to purchase. Firstly, look into the average house price in the area you're considering buying in. If you have an idea of what you could borrow, you should be able to calculate the deposit you'd need for your ideal home.
That said, the longer you can save and the more you can add to your savings, the better position you will be in. There are other fees you will need to pay for when purchasing a house, including conveyancing fees and any fees for mortgage brokers you may have used.
It can be a good idea to have a little more than you need for your property deposit in order to cover these additional areas. Plus, a larger deposit will mean that you won't need to borrow as much. Anything you borrow will have interest applied to it, so reducing your borrowing will reduce how much you'll need to pay back plus interest. Save until you feel comfortable with your financial position, then you can go forward with confidence.
Our finances are limited - please tell us how to save for a house on a low income without affecting our other finances
When navigating your financial situation with a limited income, you won't want to do anything that risks your immediate financial safety. This can make saving difficult as you won't want to lock away funds which you may need in an emergency.
Opening a Lifetime ISA can feel scary considering the money in there can't be withdrawn without a penalty. The trade-off is that whatever you save within it get a 25% bonus added on top. Have a separate savings account where you can add what you can over a longer period of time. Once you have an amount in there which you're comfortable with that you can access just in case, you can start to add bits into your Lifetime ISA every so often.
Upskilling and gaining more qualifications through work or in your spare time can potentially put you in a better position. You could try to negotiate a raise at work or consider a role with a higher hourly rate or salary. This can increase the amount you're saving for a deposit on a house each month.
You can also think about potentially moving into a more affordable area for your first home. This can make that initial move require less deposit and you won't need to borrow as much. In most cases, this will still be less than what rent would cost you on a monthly basis. You will then be able to use that saving for a deposit on your next property.
All the conveyancing needs for first-time buyers in one place with Homeward Legal
Homeward Legal has a panel of conveyancing solicitors spanning the entire country who can put their experience to work for first-time buyers. We can provide you with expert advice and an outstanding service surrounding your first property purchase once you've saved your deposit.
If you're ready to proceed, you can call our team now on or get a no-obligation quote here. We offer a no-completion, no-fee guarantee, so you can feel completely comfortable that you won't be out of pocket if your transaction is not completed for any reason.