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    How to save for a mortgage

    Mother and daughter counting pennies from a jar.

    Who is this page for?

    This page is for first time buyers looking for information on how they can save for a mortgage and take their first step on the property ladder. 

    In this article

    How to save for a mortgage deposit

    Saving for a mortgage deposit is your first step towards buying your first house – but it can be a big step for many.

    Typically, your deposit should cover between 5% and 15% of the total purchase price of your property.

    For example, with a property worth £200,000 a 5% deposit is £10,000. A 15% deposit would be £30,000. Putting together a savings plan can help you reach this milestone.

    And remember, your deposit isn’t the only thing you’ll need to budget for when buying a new home – there’s moving day, fees and a few other costs to consider. Read more about how much buying a house may cost.

    What’s the minimum mortgage deposit?

    The minimum mortgage deposit you’ll need is usually 5% to 15% of the total value of your house. Your mortgage provider will then lend you the money to cover the rest. If you can afford a larger deposit, it can mean lower monthly repayments.

    The value of your deposit will vary depending on property prices in your area. In the early part of 2018, the average deposit for first-time buyers was 16%.

    Ways to save for a mortgage deposit

    There are lots of ways you can save for a deposit – from simple lifestyle changes to using government schemes. Some ways people save for a mortgage include:

    • Buy with your partner – Buying with a partner can make it easier to save as you may decide to split the deposit amount and save together.
    • Shared ownership arrangements – Shared ownership mortgages can reduce monthly mortgage payments and deposit size, as you only need a deposit to buy part of a home. But you will have to pay monthly rent too.

    Other ways to build up a deposit

    • Cash gifts from family – Sometimes, the ‘bank of mum and dad’ can help out by providing all or part of the deposit.

    Make the most of your savings

    Saving is only the first step – making these savings work for you is the next step.

    To make the most of your savings, choose a savings account that offers a high interest rate. These will usually be fixed savings accounts or ISAs, where you can’t withdraw money from during a fixed period.

    If you go for an ISA with a fixed term, make sure it lines up with your moving timeline so you can access the money for the deposit when you need it.

    We can’t offer financial advice, so speak to an impartial financial adviser for more tips on making the most of your savings.

    What impacts the mortgage rates offered to you

    Every lender will consider different criteria, but these are some of the common elements they’ll look at when deciding which interest rate to offer.

    Credit history

    Your credit score influences the mortgage rate you’re offered, as it shows your track record of paying off loans and whether you’re likely to keep up with your mortgage repayments.

    Deposit size

    The money you borrow when you take out a mortgage is worked out by taking away your deposit from the purchase price of your new home. A higher deposit gives a better loan to value ratio. A better loan to value ratio means you’ll probably be offered lower interest rate deals.

    Length of the mortgage term

    If you choose a mortgage that’s repaid over a shorter period, you may have higher monthly payments, but pay less interest.

    If your mortgage repayments are spread over a longer time, you may pay less on your repayments, but more interest. A mortgage adviser can help to recommend a term that works for your circumstances. 

    How to save for a deposit while renting

    If you’re still renting and looking to make the switch to home ownership, it can be tough to balance monthly rental payments and saving for a mortgage.

    Saving for a deposit while paying rent can seem daunting, there are a few things you can do to make it easier:

    • Downsizing – Renting somewhere smaller than your current place could reduce your monthly rent and make it easier to save.
    • Getting a lodger or housemate – If you have space, finding someone to share your home can help split your bills and rent – as long as your landlord agrees to this.
    • Selling what you no longer need – Decluttering – and selling what you don’t need – can help to raise extra cash towards your deposit.
    • Moving to a house share – Moving into a shared house could reduce the cost of bills, giving you more money for saving. 

    The content on this page is for reference and does not constitute finance advice.

    For impartial financial advice, we recommend government bodies like the Money Advice Service.

    Related pages

    Find out more about mortgages.

    How much is your house worth? >

    What is a LTV ratio? >

    Mortgage deposits explained >

    How to pay off your mortgage early >

    Calculators & tools

    We have a range of mortgage calculators to help you:

    • Find out how much you could borrow from Lloyds Bank
    • See how much you could save if you make overpayments on your mortgage
    • Get an idea how a change to the Bank of England Base Rate could effect your monthly payments

    Use our calculators and tools >

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