Your Financial Options For How To Save For A Deposit
The idea of owning my own property and having somewhere that was truly mine was something I aspired to. Thankfully my shared ownership journey was very much me being in the right place at the right time. I made the decision to live at home during my university years and I worked full time. So being able to save for a deposit was made a little easier as my expenses were low. Doing this was the only way I was able to jump on the property ladder at the age of 22.
But did you know the average price of a home in the UK is £230,000?! And if you’re in a major city, or want something a little bigger prices can rocket. And the absolute minimum deposit you can put down with any scheme is 5%. So it’s worth working out what kind of mortgage you’d be able to get to get an idea of your minimum deposit amount.
Depending on how agressively you save, if you’re just starting to save for a deposit then it may take a number of years. But that time will be well worth it. Here are some of the best ways to save for a deposit to get your foot on the property ladder.
Save for a deposit with a lifetime ISA
If you’re between the ages of 18 and 39 you can open a lifetime ISA to save to buy your first home as long as it’s under £450,000. I’m sure for first time buyers keeping under that figure will be pretty easy. You can save up to £4,000 every tax year (April-April) until you’re 50. Then the government will pay you a 25% bonus directly into your account 4-8 weeks later.
This means if you save £4,000 a year you’ll get a £1,000 bonusb added to this. If you’re thinking of doing this soon remember you can stash £4,000 up to April and another £4,000 after for the max bonus. This is a great way of getting some extra money when you’re saving. And you can always save more by opening another ISA or a general savings account.
Look into shared ownership
I’ve spoken about shared ownership numerous times as it was the scheme which allowed me to get into the property ladder. The scheme allows you buy between 25% and 75% of a property and then pay a reduced rent on the rest. For most people the reason buying is out of the question is because we can’t get a mortgage. Even if we’d be able to pay the monthly mortgage cost. So shared ownership means you’ll need a much lower mortgage as you’re only looking to buy a percentage of the property.
When I got mine I had 45% of the property and then paid a reduced rent on the rest. Most shared ownership properties are either new-builds or re-sales of recent new builds. I was lucky and moved straight into a new-build which meant no one else had lived in the property before. Over time there is the option to buy a bigger share of the property if you can afford it.
If you want more information on shared ownership, or some of the realities behind it check out my posts.
Save for a deposit with a help to buy equity loan
The government has a pretty good scheme if you’re looking to buy a new-build home which I didn’t know much about until recently. If you’re looking to buy in full (and not in part like shared ownership) you can borrow up to 20% of the property price and it will be interest-free for the first five years. This means after a 5-10% deposit you’d only need a mortgage for 75-80% of the property which may make it more affordable.
You then have time to start paying back the loan interest-free alongside your mortgage. But the loan can make a huge difference to begin with and mean you’ll need a smaller mortgage.
Haved you ever saved for a deposit? Or are you saving now?
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14 responses to “Your Financial Options For How To Save For A Deposit”
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I guess I was fortunate as I never had to save for a deposit – just had it there as I needed it – but if I had to now – the ISA sounds great.
It’s absolutely crazy how much houses cost in the uk and so unfair for those on minimum wage who struggle to pay bills never mind save for a deposit. Thankfully, I’ve always set up a standing order for a bit of money to go into a savings account for my son so when he’s older, he will have some money to help
That’s such a nice idea to do that for your son, you’re so right it’s tough as most can’t save for a deposit especially when they’re renting at the time x
It’s so sad to think about how big of a deposit is needed in order to get onto the property market. Although it’s good to see that there are ways in which you can help save money
This is really helpful – we have got some money towards a deposit and have been struggling to know where to put it!
It has been a long time since I have saved for a deposit, it has all changed now! It is so difficult to get onto the property market now.
Really helpful.
I’m terrible at saving money! I really need to get better at this!
It’s insane how expensive houses are in the UK.
We just missed out on not having to have a deposit, but thankfully we came into enough cash to give up that stability and it ticked a box x
There are a lot of shared housing opportunities cropping up in the area that I live in. This would probably be my best option.
Both my teen boys opened help to buy ISA;s before they stopped doing them. Callan is saving at the moment but Kian won’t until he finishes uni
That’s so great that they opened them while they could, you can never start too early when it comes to saving x
These are all such great tips, thank you! Me and my husband are currently trying to save a deposit to buy our first home and the deposit has been the biggest stumbling block for us (we already rent and pay a high rate so know we can easily afford mortgage payments!). I think the shared ownership will work best for us and we love that you have the option to then go on and buy back more percentage when you can!
It’s so tough to pay rent and also save for a deposit. Shared ownership is what I did to begin with as it was the only way I could get onto the property ladder x
This is a great post, with some really good ideas. We currently rent and are having to accept that the idea of owning our own home if getting further and further away.