To be able to start saving for a home, firstly you need to get an idea of how much you need to save.
Many mortgage lenders have an online calculator that will help you establish your price range by giving a quick indication of how much they will lend, what your repayments will be and how much of a deposit you will need.
Bear in mind that these calculators are for illustrative purposes, based on the product range on offer at the time, and the result doesn’t constitute a mortgage offer which would require a full application.
Typically, mortgage providers will lend you a percentage of either the purchase price or property valuation, whichever is lower. The rest is what you need to save for your deposit. Bear in mind that the more deposit you put down, the less you need to borrow.
Review your finances
Once you know how much you need to save, a review of your finances will help you make a plan. Make a list of your monthly income, including basic salary and any regular overtime/bonuses, and then compare it with your outgoings.
Include as much as you can to build an accurate picture, including everything from rent, bills and groceries to leisure and transport expenses. Don’t forget little luxuries add up too – a couple of pounds a day on a smoothie on your way to work could be costing you more than £500 a year.
With these figures at hand, you can work out what you can save each month. For example, if you were aiming to save a £20,000 deposit:
- Monthly income (after tax) = £1,957*
- Monthly expenses = £1,200
- Remainder/potential saved each month = £757
Time to save £20,000 saving = 27 months
*Figures are for illustrative purposes only, based on annual salary of £30,000.
Don’t forget you may also need to factor in additional costs to buy a home, such as valuation fees, stamp duty and legal fees. The Money Advice Service can help you build a picture of the upfront fees you may need to take into account.