How to raise a deposit for a home

5 min read

Updated: 04 Apr 2024

In this guide / article

Building up a deposit is one of the biggest hurdles to getting on the property ladder. Rising house prices mean first-time buyers often need to put down tens of thousands of pounds as a deposit. Unless you have a very high salary or are lucky enough to have family prepared to stump up the cash on your behalf, that means saving hard.

Key takeaways

Generally for first time buyers at least a 5% deposit is required, but aiming for 10% or more is better as larger deposits reassure lenders, leading to more affordable mortgage deals
Cash ISAs, fixed-rate bonds, and certain current accounts are good savings options if saving over a medium to long period of time
Start saving early, choose the right savings options, and use comparison tools to find the best mortgage deals

Buying a home is a significant milestone in many people's lives, but it can also be one of the most challenging financial hurdles to overcome. One of the first steps in this journey is saving for a property deposit. Understanding the ins and outs of deposit requirements, the importance of early savings, and the best savings options can make the process less daunting.

The Basics of Property Deposit

Before you start house-hunting, it's essential to know how much you'll need for a deposit. Generally, you'll need at least a 5% deposit to get your foot on the property ladder. However, this is the bare minimum and will limit your mortgage options. Aiming for a 10% deposit is more advantageous, especially in high-priced areas like London, as it opens up a wider choice of lenders and deals. For the most competitive mortgage rates, a 25% deposit is the golden standard.

Generally, you’d need to put down at least 5%, which is often the minimum required by lenders.

Putting down 10%, for example, would get you a better deal. If you’re buying in London, these figures will be even bigger due to the capital’s high house prices.

Don’t panic, though! Wherever you are buying, if you can only get your hands on the minimum 5%, there are schemes and deals to help you. For instance, the government is offering its Help to Buy scheme, which you can read more about in our handy guide, Help to Buy Explained.

Some lenders also offer special mortgage deals to those struggling to get on the first rung of the property ladder. You can read about these in our guide to mortgages for first-time buyers.

For more information on deposits, read the following guide: How much deposit do you need for a house

Why Early Savings Matter

The earlier you start saving for a deposit, the better. Early savings give you a significant advantage, allowing you to accumulate a larger deposit over time. This not only broadens your mortgage options but also reduces the interest rates you'll be offered. Remember, the larger your deposit, the less risk you pose to lenders.

Post Credit-Crunch Lending

Since the credit crunch, banks and building societies have been more cautious with their lending. A larger deposit can reassure lenders, granting you access to more affordable mortgage deals. Don't forget to budget for other costs such as stamp duty, moving costs, and legal fees. For a more detailed breakdown of buying costs, you can refer to our comprehensive guide.

Deposit Requirements for Different Buyers

Whether you're a first-time buyer or self-employed, deposit requirements can vary. Government schemes like Help to Buy can be a lifeline for those with only a 5% deposit. For the self-employed, showing healthy accounts can open up the same mortgage options as everyone else, but a larger deposit can lead to better deals and rates. And if you're looking to buy without a deposit, 100% mortgages with a guarantor are an option, albeit a risky one.

If you don’t have enough funds to put down a deposit for a home, but are eager to get on the property ladder, you should have the option to buy a house without a deposit.

In fact, there are lenders who offer 100% guarantor mortgages, allowing you to purchase a property with no deposit. However, you’ll need to find someone to act as a guarantor (usually a parent or grandparent), that is someone who’ll repay the instalments on your behalf if you can’t.

Bear in mind, though, that guarantor mortgages are financially-risky options. So don’t be too upset if your close family members or friends are not comfortable signing up as a guarantor.

Where to Save for Your Deposit

Choosing where to save for your deposit depends on your timeline. If you're planning to purchase soon, regular savings accounts or easy access accounts might be the way to go. For those looking at a longer timeline, cash ISAs, fixed-rate bonds, or even certain current accounts could be more beneficial.

Short-term Savings Options

Regular savings accounts are ideal for short-term goals, offering good interest rates for monthly savings without withdrawals.
Easy access accounts provide flexibility but typically come with lower interest rates and possible restrictions.

You should also be aware that many easy access accounts come with bonus rates that expire after a year or so. At that point, you’ll have to move your cash or suffer a plummet in returns. You can compare easy access savings accounts on our page.

Medium to Longer-term Savings Options

Cash ISAs allow you to save tax-free up to a certain amount each year, with both variable and fixed rates available.
Fixed-rate bonds offer better interest rates for those who can commit to not touching their savings for a set period.
Current accounts sometimes offer competitive interest rates on balances up to a certain limit.

Shopping Around for Savings Accounts

With savings rates at historic lows, it's crucial to shop around for the best savings accounts and keep an eye out for better rates elsewhere. Regularly reviewing your savings strategy can ensure you're always getting the most from your money.

Mortgage Repayment Warning

It's important to remember that failing to keep up with mortgage repayments can result in the repossession of your home. Always ensure that you're financially prepared for the commitment of a mortgage.

A warning that your home may be repossessed if you do not keep up repayments on your mortgage.

Finding the Right Mortgage

When you're ready to look for a mortgage, using a comparison tool like MoneySuperMarket's can simplify the process. By inputting your personal and financial details, you can receive example mortgage quotes and utilize mortgage calculators to assess your costs. This can be a valuable step in finding the mortgage deal that's right for you.

Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.

Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.

Saving for a property deposit is no small feat, but with the right knowledge and tools at your disposal, it's an achievable goal. Start early, save diligently, and make informed choices about where to grow your funds. With patience and perseverance, the keys to your new home will be within reach.