Saving money for a mortgage deposit

The average first-time buyer puts down a 20% deposit on their first home, which could mean finding a daunting £50,000 (on a £250,000 property) or more.

You might struggle to raise this kind of money on your own and there are some options available to you.

There are mortgages available which require a lower deposit of around 5% or 10%. You’ll need to shop around more to find these offers and you should remember these are likely to cost you more in interest over the length of the mortgage and can have a higher interest rate. 

It’ll help you work out the size of the mortgage deposit you’re going to need if you check house prices in the area where you want to buy.

• Look for properties for sale in your chosen postcode at RightmoveOpens in a new window

• Use the Nationwide house price index calculatorOpens in a new window

There are also a few government schemes to help first time buyers get on the property ladder. 

These include the Lifetime ISA, Help to Buy, Right to Buy and Shared Ownership.

Find out more in our guide Government schemes for first-time home buyers and existing homeowners

One you know how much you need to save, you need to think about where you’ll save it.

You might already have a bank account that lets you set up a separate pot for your financial goals, or another savings account you could use for this money.

If you’re going to be saving for a long time, you should think about how much interest you could earn on this money.

An instant access savings account might seem convenient. But they often pay a lower rate of interest, and if you won’t need the money for a few years, you don’t need to get at the money straight away. So you might want to look at a longer term savings account which pays you more interest.

Setting up a regular standing order to automatically transfer money into your savings account can help you save even faster.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

Popular websites for comparing savings accounts, include:

• Money Saving Expert
• Money Supermarket
• Which?

Remember:

• Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
• It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.

Review your savings account at least once a year to check you’re getting the best rate of interest. If you’re using a Lifetime ISA, remember to make the most of the £4,000 allowance before the end of the tax year (5th of April) to get the maximum 25% bonus.

If your income goes up, see if you can add the extra money to your standing order each month, it’ll help you reach your goal sooner.

• Open a savings account if you don’t already have one – go online or book an appointment at your bank or building society.
• Check whether you can reduce the deposit you need, for example, through a Help to Buy scheme or family support.
• Set up a regular payment into your savings account every month. Use this downloadable template to send a standing order instruction to your bank (DOCX, 17KB).