Guide to saving a deposit

When you are applying for a first-time buyer mortgage, you will need a deposit. With the cost of rent almost as high as mortgage payments, saving can be tough. The cost of living can leave you with very little leftover. So, if you are hoping to get on the property ladder, we have some tips on saving for a mortgage deposit.

Work out what you need

first-time buyer mortgage can require up to a 20% deposit. Depending on the cost of your first home, it can mean you need a substantial amount. It can feel overwhelming if you require a large amount for a deposit. But, some things can help reduce the amount you need:

· Ask your parents for help

· Buy a home with friends or family

· Equity schemes

· Buy part of a property

Ask your parents for help – If a large deposit for your first home is what you need, you could turn to the bank of mum and dad. Your parents may be able to help with a cash gift or possibly be a guarantor. Bear in mind though they will be liable to pay the mortgage if you can’t if they act as guarantor.

Buy a home with friends or family – Other people you know maybe in a similar situation and not be able to get on the property ladder. If so, you can join together to buy your first house. Set out everything from the beginning. You will need to have a clear plan if someone wants to sell their share later.

Equity schemes – Renters of council or housing association properties can be eligible for shared ownership schemes. If you are renting one of these places, you can apply for an equity scheme. In these types of deals, you buy a portion of the house and pay rent on the rest. You will have a smaller mortgage and deposit but still, pay rent.

Buy part of a property – If you do not rent from a council, there are other types of equity schemes you can get. Help to Buy allows you to buy a new home with help from the government or the builder. Typically you will only have to give a 5% deposit with the scheme providing the rest. It is usually a free loan for so many years and will be paid back later. So, you will need to plan how you will pay it back.

How much can you afford to save each month

Once you know how much you need for a deposit, you can start saving. Look at your expenses every month and be realistic about how much you can put away. Regularly saving a little each month is a better strategy than relying on one-off bonuses.

Set up a savings account, you can easily do this online or pop into your bank. Once you have your savings account, set up a standing order for each month. Only set the amount at what you can comfortably afford. If you set it too high, you will find it difficult and may give up altogether.

Make sure you are budgeting wisely

When you look at your outgoings, make sure you are getting the best deal on everything. Look at your gas and electricity tariffs and compare mobile phone deals. You may be able to increase your savings by moving to better offers for your insurance as well.

You will also want to make sure you factor in unexpected costs too. Replacing a broken appliance or needing repairs on your cars will all need to be part of your budgeting. 

Make the most of your savings

The savings account you put your deposit money in can also help with building up funds. So, compare the best savings account rates for the best deals. If you can afford to save a set amount each month, then a regular savings account will work for you. The amount you save may change each month so you can choose an instant access account.

Banks have different offers when it comes to a savings account so do your research. Online accounts can sometimes offer higher rates, so make sure you look into these too.

Reduce your monthly costs

If you want to save for a mortgage deposit even faster, there are some steps you can take:

· Move back home with your parents

· Find a smaller property to rent

· Rent with someone else to share the costs

Finding the best first-time buyer mortgage

As a first time buyer, you will find lots of mortgage deals out there. It’s a big commitment so you will want to find the best deal possible. Many banks and lenders will offer a mortgage consultation service. You will want to use an impartial advisor. They will be able to compare the best first-time buyer mortgages for you.

An expert on first-time buyer mortgage deals will look at what you have in savings and what you can afford. The advisor will be able to show you which offers are most suitable for your situation. At Friends Capital, we offer a free mortgage review service. We have a specialist first-time buyer team that will be able to help you get the best mortgage for you.