5 Ways to Save for a Deposit on Your First Home

One of the most challenging aspects of buying a home as a first-time buyer is saving a deposit. Getting on the property ladder is an achievement worthy of celebration, but there’s no sugarcoating it–saving for a deposit takes time, effort and a substantial amount of discipline.

Most of our clients come to us with a bit of money in a savings account. However, there’s also many people who don’t know where to begin with saving. This is completely normal, since we’re not taught these life essentials in our younger years. 

With years of experience between our team at Mortgage Synergy, we’ve helped many first-time buyers get the keys to their first property. So, how do you save for a deposit? Read our tips for saving for a first home.

How much is needed for a deposit?

Some UK mortgage lenders can accept a minimum of 5% deposit, allowing you to get a 95% loan-to-value mortgage via the Mortgage Guarantee Scheme. However, you’ll need to check for eligibility. For most properties, lenders prefer a 10% deposit. The more you can put towards your deposit, the better.

The exact deposit you’ll need depends on:

  • The property’s price
  • Your mortgage deal.

Buying your dream home: how to save for a deposit

1. Set a goal

It sounds obvious, but before you start saving, you need a goal. As a mortgage deposit is quite a hefty sum, planning is key. 

To calculate how much you need for a deposit, it’s important to know how much you can realistically afford and how much you can save.

Your first port of call is to look at property prices in the area you’re intending to buy a home in. This gives a rough idea of the average property price based on your preferences. For example, if you’re looking for a 2-bedroom townhouse in King’s Lynn, see what the average going price is.

Let’s say a house you’ve got your eye on is worth £270,000. A 10% deposit would be £27,000. A 5% deposit is £13,500. You can use our mortgage calculator to help calculate your mortgage.

TSB Bank recently reported that the average mortgage length for a first-time buyer is now 32 years. Your mortgage repayments must be affordable for you for a long period. We mention this because the more you can put forward, the lower your monthly repayments will be. This is something to keep in mind when setting a deposit saving goal.

2. Cut out any unnecessary monthly outgoings

Now you’ve got a savings goal, you can now start making plans to achieve this.

Before you can draft a budget, you will need to take a thorough look into your monthly outgoings. Go through your bank statements and see where you can cut costs. 

Aside from your essential bills, such as rent and utility costs, are there any regular payments you can cancel to save a few pounds each month?

For example, any TV / film streaming services. It might be tough at first, but cancelling one subscription could save you around £132 a month. Many of us have more than one subscription, so unsubscribing for the time being will be helpful.

Or if you like to pick up a takeaway coffee whenever you leave the house, can you make coffee at home? Small swaps like this save tons of money, and you’ll be surprised at how much.

Here are some other ideas to help you save for a deposit:

  • Bringing your own food instead of buying lunch while at work
  • Swapping the occasional taxi / Uber for public transport or walking
  • Organising at-home date nights rather than heading to a fancy restaurant.

3. Make sacrifices

Unfortunately, to save up for a deposit, you’re going to make some sacrifices. These aren’t permanent sacrifices, so no need to worry. You’ll thank yourself later for being resilient and determined when you’ve got a mortgage.

Do you go on any holidays abroad? You could make these trips cost less by going to an alternative destination. You could even ditch the beach altogether while you save. We know it’s hard, but the quicker you add money to your savings account, the quicker you’ll get the keys to your new place.

While holidays are often much needed breaks from everyday life, there are some luxuries you can temporarily put on hold. It may seem difficult and mildly depressing to cut out some of life’s simple joys, but as soon as you’ve got your deposit, you can loosen up the savings belt a little.

Remember: saving for a house is a temporary measure. You’re not cutting out holidays or any of your small luxuries forever. Temporary pain will equate to long term gain.

4. Create a budget

Creating a budget is an important step in saving for a deposit. You’ll be able to keep track of your income and spending, and make changes where necessary. You’ll also spot any overspending.

A spreadsheet is perfect for budgeting your income each month. And it doesn’t have to be boring… You can colour coordinate spending categories, for example. 

There are many spreadsheet templates available for you to take inspiration from. 

TOP TIP: You can find these by searching online for ‘budget spreadsheet templates’.

People use the 50-30-20 rule as a budgeting technique. This breaks down into:

  • 50% of income used for your ‘needs’, e.g. housing costs, bills, etc.
  • 30% is allocated for the things you ‘want’, e.g. days out, meals out and subscriptions
  • 20% goes to your savings.

Whether this split works for you depends on your deposit goal. Tweak it to suit your preferences and personal situation. 

The great thing about using a spreadsheet for budgeting is that formulas help to make calculations. These are automated, so whenever you insert a value into the appropriate cells, you can see a calculation based on a formula. For example, you might use one which adds up your total spending for the month.

5. Set up a standing order

Saving is easier said than done… annoyingly. A surefire way of ensuring you save a specific amount each month is by setting up a standing order with your bank. You can incorporate this into your budget. It’s a great method, helping you to remain disciplined and consistent with your savings.

It’s best to set a standing order for the day you are paid. The money then automatically enters a savings pot without you having to really think about it. 

The amount you set as a standing order will depend on how much you earn and the percentage of income that goes on essential outgoings.

For example, let’s say you earn £2,000 each month after tax.

  • £1,200 is allocated to rent and bills
  • £300 is money for anything else–those small luxuries 
  • And £500 for your savings.

This is a very rough idea of how your monthly income could be allocated. With this example, your standing order would be set to £500 each month. If you stick to your budget, this is £6,000 in a year.

If you’re buying your first home with a partner, if you both set standing orders according to your incomes and outgoings, double the amount will be saved.

And to wrap up, if you’re unsure how much you will need for a deposit, come speak to us. Our team of mortgage advisers are on hand to help you figure out the logistics of getting a mortgage and offer practical advice.

Ryan Bensley

Ryan is the Director of Mortgage Synergy, an independent mortgage advisory based in King's Lynn, Norfolk. With 10 buy-to-let properties, Ryan knows the mortgage process inside out. His first-hand knowledge of the industry afforded him the opportunity to start Mortgage Synergy with confidence in 2023. Outside of work he is married to Becky, and a devoted cat dad to Max & Coco. On a rare occasion that you catch Ryan away from the office you will probably find him at a UK motor racing circuit where he competes in a top tier UK Car Racing Championship.

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