Saving for a mortgage deposit is often one of the biggest hurdles on the journey to homeownership. While it can feel overwhelming at first, having a clear plan and understanding your options, can make the process far more manageable.
In this guide, we’ll walk through how much deposit you might need, how to build a realistic savings plan, and how government-backed schemes such as the Lifetime ISA could help boost your savings.
1. How Much Deposit Do You Need?
In most cases, you’ll need a minimum deposit of 5%–10% of the property price. However, the exact amount can vary depending on the lender, your financial circumstances, and the type of mortgage you’re applying for.
A larger deposit reduces your loan-to-value (LTV) ratio, which is the percentage of the property price you’re borrowing. Generally, the lower the LTV, the better the mortgage rates available, potentially saving you thousands over the life of the loan.
It’s also important to look at local house prices in the area you’re targeting. This helps you set a realistic savings goal based on actual property values rather than national averages.
2. Build a Savings Plan That Works for You
Once you have a target in mind, the next step is creating a plan to reach it.
Start by deciding how much you can realistically save each month without stretching your finances too far. From there, calculate how long it will take to reach your deposit goal.
One of the most effective tools is automation. Setting up a standing order ensures your savings happen consistently, without relying on willpower alone.
It’s also worth considering your timeframe. Saving a smaller amount over a longer period may be more sustainable than trying to save a large sum quickly and risking burnout or financial stress.
3. Choose the Right Savings Account
Not all savings accounts are created equal. If you’re saving over several years, it’s worth looking beyond instant-access accounts with low interest rates.
Use comparison websites to weigh up:
- Interest rates
- Access to your funds
- Security and provider reputation
Some accounts offer higher returns in exchange for limiting withdrawals. The right choice depends on whether you need flexibility or are comfortable locking funds away to maximise growth.
4. Use Tax-Efficient & Bonus Schemes (Such as a Lifetime ISA)
For first-time buyers who are still several years away from purchasing, government-backed schemes can make a significant difference.
A Lifetime ISA (LISA) allows eligible savers to receive a 25% government bonus on contributions, up to annual limits. This can substantially boost your deposit savings over time, something we explore in more detail in our dedicated Lifetime ISA and savings schemes videos.
Key rules to be aware of include:
- Contribution limits
- Age eligibility
- Minimum saving period before funds can be used
- Property price caps
When compared to standard savings accounts, the combination of bonuses and tax efficiency can be extremely powerful for long-term savers.
5. Know the Eligibility & Criteria
Bonus schemes come with conditions. You must meet eligibility requirements such as:
- Being within the qualifying age range
- First-time buyer status
- Using the funds for a qualifying property purchase
Withdrawing money for non-qualifying reasons may trigger penalties, potentially reducing or wiping out the bonus altogether.
It’s also important to keep your plans under review. Changes to your purchase timeline or property price expectations could affect whether your chosen savings method is still the best fit.
6. Combine Strategies & Stay Flexible
Many successful buyers use a combination of strategies, such as:
- A regular savings account
- A bonus scheme like a Lifetime ISA
- Automated monthly standing orders
Review your plan at least once a year or sooner if your income, expenses, or the housing market changes.
Most importantly, stay realistic. House prices and interest rates fluctuate, and your deposit target may need adjusting along the way. Flexibility and consistency are key.
Want to know more? Speak to our friendly team of mortgage advisors today!
We’ll do everything we can to make applying for a mortgage and becoming a homeowner as simple as possible for you.
Pick up the phone: 01925 573328
Pop an email to: hello@ukmc.co.uk
Disclaimer
UK Mortgage Centre Limited is an Appointed Representative of Refresh Mortgage Network Limited.
Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register under firm number 1019794.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages.
The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
You may be charged a fee for your advice. A typical fee is £495, which would be payable when you receive your mortgage offer. Your dedicated advisor will discuss this further on your free initial phone call.
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