How to save money for a mortgage deposit
Buying your first home is a key life milestone. As costs continue to rise, however, becoming a homeowner is starting to feel out of reach for many. It can take years for people to save for a deposit.
Home deposits typically cost 5-20% of the property on average, meaning you’ll need to save thousands of pounds. This figure can be daunting, and feel unmanageable – particularly as a larger deposit is best to get a good deal on a mortgage.
Thanks to our home deposit savings account, however, saving for a home just became easier. Now, you can save as often as you can until you’ve achieved your goal.
Options for savings for a mortgage deposit
In most cases, the minimum deposit required to get a mortgage on a house is 5%. However, a larger deposit usually results in a better monthly deal on your mortgage, making larger deposits of up to 20% lucrative for homebuyers.
If you’re looking at buying a home that is worth £150,000, the relevant deposit amounts would be:
5% – £7,500
10% – £15,000
20% – £30,000
If you’re saving for a mortgage, however, there are multiple options available to you – each of which have their own benefits and drawbacks. A variable rate mortgage can be cheaper monthly, but is subject to change with the country’s interest rates. Given the financial insecurity of the country at present, your monthly payments could skyrocket.
You could also opt for higher interest payments or a longer loan period, which could spread the cost over a longer period of time. Depending on your circumstances, there may be government support available to help with the cost of purchasing.
The best way to save for a mortgage is with a dedicated account – so you don’t chip into your savings for monthly expenses. Our dedicated savings accounts are the best way to do so.
How much deposit do I need for a mortgage?
The amount you’ll need to save for a mortgage deposit will depend the house in question, and whether you’re looking to pay less each month. If you’re prepared to pay a higher monthly sum for your mortgage, the minimum deposit is usually 5%.
It’s worth keeping on top of house prices – the UK House Price Index can be a good indicator of how much you’ll be expected to save. Try cross-referencing house prices across different estate agents and property websites like Rightmove and Zoopla – this can help you gauge the market.
5% of a £150,000 home is £7,500. If you pay £250 a month into your savings account, you’ll be able to place a deposit on a home in just two and a half years.
It’s also possible to pay in a lower monthly amount over a longer period of time. If you’re not in a rush, but need to save for a home, paying £100 monthly into your savings account could get you a deposit in just over six years.
MoneyHelper’s Savings Calculator is another good way to ensure that you stay on top of your savings.
Start saving for your mortgage deposit
It’s time to start saving for your mortgage deposit. But saving money can be easier said than done. So, here’s some tips to help you keep saving consistently:
- Set a monthly savings goal alongside your long-term target figure
- Use round-up spending
- If you’ve spent £18 of a £20 note, save the extra £2 and deposit it!
- Budget each month
- If your expenditure comes in under budget, add the excess to your savings account!
- Reduce your bills
- Try shopping around for new energy providers or get a better deal on TV/Wi-Fi
- Cut down on daily spending
- Is there anywhere you can save? Buying coffees in town are a daily expense for many!
- Use cashback and earning cards for extra value
- Consider using a budgeting app
- Think about your current living situation
- Could a house share help you save money on rent?
How do I open a home deposit savings account?
Applying for a home deposit savings account at Moneywise has never been easier.
- Click the button below to apply
- Fill in your details as accurately as possible
- Submit the form
- One of the Moneywise team will be in touch as soon as possible to confirm whether you have been successful
To apply you must:
- Be aged over 18
- Agree to Moneywise Credit Union rules
When you join as a member you will receive an account number so you can start saving straight away. Our friendly team will help you through the simple application process at any of our local service points, or you may also apply online!
Open your home deposit savings account today.