Saving for your first deposit

Saving for that first deposit is often the biggest hurdle between you and getting your dream home.

It seems like a daunting process, but it doesn’t have to be. With careful planning and some research, you will feel totally in control. Here are Coreco’s top tips on saving for that evasive deposit.

Start saving now!

If your dream is to own your own home, the earlier you start saving, the quicker you can achieve your dream. Also, the bigger the deposit you can save, the better the mortgage deal. It’s important to consider all the other associated costs of buying your first home including stamp duty and moving costs.

Once you have worked out the amount you need to save, create a plan to reach this goal. If you know you need to save £20,000 and you want to buy in 5 years time, put away £333 each month. If this is out of your budget, then you need to reassess your goals and adjust your monthly payments accordingly.

Get a 25% bonus on your savings

Help to Buy ISAs and Lifetime ISAs are specifically designed to help you save for your first home. These ISAs can also be used in conjunction with the Help to Buy Equity Loan scheme. If you’re planning on buying a home in the next few years, we think this is a no-brainer. Here are the key differences to help you choose between the two accounts:

Help to Buy ISA

• You can open an account from the age of 16
• You can make an initial lump sum payment of £1,000 and then set up a direct debit for up to £200 each month afterwards.
• The government will add £50 for every £200 saved in your account up to £12,000. So, that’s a maximum bonus of £3,000.
• The bonus is available on properties worth up to £250k or £450k in London

Lifetime ISA

• You can open a LISA if you’re aged between 18 and 40
• You can deposit up to £4,000 a year in total – no monthly limits
• Every year, the government bonus of 25% is deposited straight into the account so you can easily track how much you can put towards your deposit.
• The bonus is available on properties worth up to £450k anywhere in the UK
• You can’t withdraw the savings in the first 12 months so if you’re planning on buying in the next 12 months, go for the Help to Buy option.

Save the right amount

The average house price in May 2017 was £220,713*, with house prices ever increasing the average house price in August 2022 is now £295,903*. This means you’d need a minimum of £14,795 to achieve the 5% minimum deposit required. Even though this is the minimum required, it will not give you access to the cheapest mortgage deal. A 10% deposit of £29,590 or even a 25% deposit of £73,975 can unlock a large range of mortgage products and rates and save you money in the long-term.

What if I can only save 5%?

Even if you can only save the minimum 5%, there are schemes available to help you get the most of your money. The Help to Buy shared equity scheme, which is available on new-build homes, allows the government to lend you the rest of the deposit up to a further 20%. Under Help to Buy, this loan is free for the first five years but you need a repayment plan in place for when the yearly fee starts in year 6.

There are also shared equity schemes that are run by property developers but the terms and conditions around this vary, so be sure to do your research.

Talk to an adviser

A qualified mortgage adviser can give you an idea if your goals are achievable and what you need to do to make sure your accounts are in order. We can ensure everything is in place for when you’re ready to purchase your first home.

Give us a call on 020 7220 5110 or fill out the form below to arrange a no-obligation chat!

Your home may be repossessed if you do not keep up repayments on your mortgage.

A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495

* Source: http://landregistry.data.gov.uk/app/ukhpi