How to save for a mortgage
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.
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
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.
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.
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.
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.
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.
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
Important legal information
Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.
Telephone calls may be monitored or recorded in case we need to check we have carried out your instructions correctly and to help us improve our quality of service.