You may be wondering, how much should I save for a house deposit? Well, we’re here to give you all the answers.
Saving for a house deposit can be a time-consuming and aggravating task, but it is necessary to get you on the property ladder.
Continue reading to learn more about what a deposit is, the various mortgage deposit options, how long it takes to save on average, and our tips to save for a house deposit.
What is a house deposit?
A house deposit is a sum of money paid in full towards the total cost of a property. You make a deposit, and your mortgage covers the remainder of the purchase price.
Understanding the different mortgage deposit options
A deposit is required to secure a mortgage for the purchase of a home. There are numerous deposit options, including:
- 5% deposits: You pay 5% of the total amount of the property
- 10%: The most common type of house deposit, you pay 10% of the total amount of the property
- Guarantor and family deposits: Family can sign for you and offer something like their home as security if you don’t pay your mortgage.
- Springboard mortgages: Famously from Barclays, family also known as “helpers” can pay your house deposit, and gain interest on the money over five years.
- Shared ownership: You pay a small deposit, buy some of the property, rent the other part and share the other part of the property.
The majority of people put a deposit down between 5% and 20% of the purchase price of the property.
How long it takes to save for a house deposit
Saving for a mortgage deposit can take a long time, especially when the amount is so substantial. According to research, it can take first-time buyers an average of eight years to save enough money for a mortgage on their first home.
12 tips on saving for a house deposit
Although there is a lot of money to save, there are a few things you can do to get there faster.
Here are 12 suggestions for saving a deposit for a home:
Cut down your everyday spending
Try to reduce your daily spending. Don’t, for example, buy a meal deal from Tesco every day. That’s £3 per day, £21 per week, and a whopping £1092 per year!
By making a packed lunch, doing larger grocery shopping, walking instead of driving – you’ll be reducing your daily spending without even realising it.
Put your savings in a seperate account
When you get paid or receive money, make sure to save it in a separate bank account.
By keeping your savings separate from the rest of your money, you won’t be tempted to spend it just because it’s there, or overspend.
There are numerous savings bank accounts into which you can deposit your savings. Make sure to check all your options and find the best savings account for a mortgage.
Track your saving and budgeting with an app, or write it down!
Consider tracking your savings so you can see how much you’re putting aside and how close you are to your goal.
Another option is to try budgeting with an app; enter all of your outgoings and make sure you account for all of your expenses. This way, you’ll know how much money is left over for yourself. Alternatively, do it the old-fashioned way and write it down!
Set a goal for yourself and hold yourself accountable to it.
The goal does not have to be massive; it could be as simple as saving £15 per month. However, once you get into the habit of saving and meeting your goals, you can gradually increase the amount.
You’ll have saved enough for a deposit for a house before you know it.
Consider new living arrangements while you save
Renting can cost you a lot of money, especially if you’re doing it on your own. Consider a less expensive living arrangement, such as a house share – or returning to live with family or friends.
Speak to family
On rare occasions, family members may be able to assist you in reaching your savings goal quicker.
It’s always worth discussing your deposit with family members in case they can gift you money or help you in the future.
Don’t forget about the government assistance
While they’re still available, don’t overlook government programmes like the Help to Buy initiative.
Reduce bills where you can
Can you reduce your bills? Living expenses are rising, making this a difficult task; however, if you can reduce your subscriptions or find a cheaper provider for essential bills, you will be able to save more money.
Try to earn some extra money
There are lots of ways to earn some extra money. For example, are you able to do freelance work in your field? Can you start a side business with arts and crafts?
Perhaps even a car boot sale will help you achieve your goals and provide you with a little extra money for your savings account.
Reuse and upcycle
This tip not only benefits the environment, but it can also help you save a lot of money.
Wherever possible, try to upcycle your items. For example, if your furniture is looking a little worn, add a fresh coat of paint and it’s as good as new. Or, if you need new items, look around the house first; you might be able to make something new out of something old.
Look into all your options
Explore all of your options. Assess the government programmes, the best bank accounts, the best mortgage deposit options, and the best methods for you. By doing your homework, you may discover that you can get on the property ladder much sooner than you thought.
Sett is here to tell you about all of your options while keeping your end goal in mind. Get in touch with us today to hear our expert advice.
Don’t be too hard on yourself
One of the most important things to remember is to not be too hard on yourself or put yourself under too much pressure.
If you make saving a stressful situation, you will eventually give up due to frustration and not achieve your goal. The best way to save for a house is the way that works for you and your lifestyle.
You’ve already made a good start by reading this article, so take it slowly and you’ll get there.