Effective Ways To Save For A House Deposit
Are you a first-time buyer with dreams of owning your first home? One of the first and most common questions asked is "how much do I need to save for a house deposit?"
It may seem like an impossible dream, especially if you live in a large city such as London, where the price of everyday life seems to increase on a regular basis. However, if you’re determined to make a go at purchasing your first home before the end of the year, then there are ways you can achieve this.
What is a mortgage deposit?
Why do lenders require a deposit?
How much does a deposit tend to be?
On average a first-time buyer typically puts down a deposit up to 20% of the value of the property they’re interested in purchasing, which in some circumstances can mean a hefty down payment being made.
However, in recent times deposit amounts have varied from 5%, 10% and 15% which is seen as more reasonable and realistic payment options. But it’s worth considering, the lower deposit percentage you pay at the start, the bigger the overall mortgage will be long-term.
For example, if the house you’re interested in costs £200,000, then:
A payment of £10,000 would be required for a 5% deposit, if you take out an 95% mortgage.
A payment of £20,000 would be required for a 10% deposit, if you take out an 90% mortgage.
A payment of £30,000 would be required for a 15% deposit, if you take out an 85% mortgage.
A payment of £40,000 would be required for a 20% deposit, if you take out an 80% mortgage.
There are several schemes to help first-time buyers make the leap onto the property ladder, such as Help to Buy, New Build and government schemes to help those with small deposits, purchase a house.
Reasons to save a bigger mortgage deposit
Although 5% deposits are still available in some instances and may be the best and most affordable option to consider, there is also reason to try and save up for a bigger mortgage deposit.
Effective ways to save for a deposit
There are a number of ways you can look to save money for a deposit, some more effective than others but they all count, no matter how big or small!
Whether or not you’re a first-time buyer, location is the most important factor to consider. Should you look to be living in big cities like London or Manchester, then you can expect property prices being at a premium. If you’re a first-time buyer or a young family then it’s worth looking at cheaper, more affordable options, such as a commuter town or somewhere in between a big city, so you can still visit the city centre on a regular basis.
If you're a first-time buyer, check out our other articles below:
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Content correct at time of publication.