How to Save for a Deposit for Your Home | The Mortgage Dog

Most people need to save for a deposit to buy their home. According to a study earlier this year, first-time buyers need more than 6 years to raise the funds for their deposit on their first property.

The research states that a single person buying a property for the average price of a UK home (£234,000) needs to save £25,554. These figures vary by region, however. 

In the North East, the average first-time buyer needs to save £14,962 for a deposit, the research claims. It takes around 4 years to achieve this, while in London first-time buyers need 8 years to save the average deposit of £45,012!

Deposits for homes are essential if you are require a mortgage to buy a property. We’ve already looked at why you need a deposit. But many first-time buyers ask what they can do to raise the funds for a deposit. This is particularly the case where buyers don’t have access to help from parents.

While saving in a bank account seems the obvious first step, there are measures you can take to to help you save. 

Five ways to save for a deposit

It’s worth exploring ways to save for your deposit on your first home. We have some tips to help you build some reserves.

1. Check out your spending

One way to save money is to spend less. That seems pretty obvious but many people think they need to spend every penny they earn. But that’s not always the case.

Create a budget and set yourself spending limits. If you use a budget planner – such as this one from the government’s MoneyHelper website – you can see where your money is going. You may discover you’re paying over the odds for gym membership or you may see a standing order or direct debit that you don’t need to be paying.

2. Start saving

To save for a deposit, start saving! Again, this might seem simple but so many people overlook the importance of savings. Many people try to save through their everyday current account but setting up a separate savings account is sensible. The temptation to spend is then taken away. 

Also, savings accounts pay interest rates that are often higher than the interest from a current account. 

Savings accounts differ depending on the bank or building society you use. Some give instant access to cash and others that require a set number of days’ notice before you can access cash. Usually, the longer you have to wait to access funds the better the interest rate.

Consumer magazine Which keeps track of monthly interest rates on savings rates. This can help you decide which is best for you.

3. Gifted deposit

The ‘bank of mum and dad’ isn’t available to everyone but you could still be gifted a deposit from a family member or friend. This pays part or all of the deposit. There are pros and cons but it could help reduce the time to save. Fore more details, check out our blog about gifted deposits.

4. Save money on rent

Tenants can end up paying as much as £150,000 on rent before they save enough to get on the property ladder, a survey by Goodlord claims. Those figures were worked out over an 18-year period, which is the average time FTBs take before they become a property owner aged 37.

You may not be paying out that much, but this clearly shows that paying rent means saving takes a back seat. If you can reduce your rent, then you could use the extra cash to put into savings for a deposit.

But how do you do it? Well, you could downsize for a period and reduce your rent. This could also mean savings in energy and other bills, such as Council Tax. Consider flat sharing to reduce your costs. And although it’s not always easy, consider moving back in with parents to save for a year or two!

5. First-time buyer schemes

First-time buyers may be able to buy a home for less than its market value through the First Homes scheme. This financial support means you might not have to save as much for your deposit. Check out the government’s website or speak to one of our team.

Your home may be repossessed if you do not keep up repayments on your mortgage