How to save for your first house deposit

Saving for your first home can be a rather daunting task, especially with the current state of the UK economy. However, with the right tools, knowledge and a clear and realistic plan, you will be able to secure your very first home in no time.

Before you think about buying your first home, there are a few things you will need to consider. Firstly, how much it will cost you, as most people buy their first home with a mortgage deposit.

At GetAgent our aim is to give UK homeowners (and future homeowners) the confidence they need to navigate the property world. To help you save money like a pro and make that first step on the property ladder, check out our clear plan below.

How much do I need to save as a first time buyer?

As a first time buyer, on average, you will need to save for a 10% cash deposit before you can withdraw money from your lender. The average house price for first time buyers in the UK is £292,118 (July 2022), therefore you will need to save £29,211 (10%).

If you are looking to buy a house within the next three years, you will need to save £811 per month. For a longer period of time you will be saving less, for example over five years you’ll be required to save £486 per month.

The average house price depends on the region you are looking to buy a property in. You will find prices have gone up with a 1.1% increase since March 2022.

The most efficient way to save for your property is by saving consistently in small amounts over a long period of time. You can use tools like moneyhelper.co.uk which calculate what house prices you can afford according to your annual salary. As well as this, you can also look into what mortgage you can take out and how much deposit you’ll need.

To buy a semi-detached house in London you need to be earning approximately £123,009 annually, whereas to buy a flat you need £82,038. The average house price in London in July 2022 was found to be £543,547.

For cheaper housing options, you can always look into different regions throughout the UK. We have provided a graph that shows the average house price in major UK cities.

After looking at the difference in house prices across the UK, you can calculate the amount you need to save for a mortgage deposit. The average first time buyer puts down a deposit of between 15-20% on their home, but there are some lenders that require a lower deposit of just 10%.

How do I start saving for a new house?

There are many effective ways to save for a house. You can incorporate small and large changes into your daily routine to help you make that first step on the housing ladder.

1. Reduce your cost and boost your savings

You can make simple changes to your daily routine. For example, switching to supermarket own brands when buying simple everyday groceries. Small steps like this can have a big impact in the long run. Other steps include:

• Reducing fuel costs by simply walking or cycling to work. This is a great way to save on unnecessary spending and also reduce your carbon footprint.
• Selling old clothes, shoes, appliances and other household items you no longer use. You can use online shopping platforms such as Vinted, Ebay and Depop to sell these items. This is a great way to make some extra money to then use to save for a deposit.
• One of our biggest expenses is eating out, ordering takeaways and drinking. While these can be fun ways to splurge, in the long run it can impact your monetary situation. You can save a lot of money by simply cooking, meal prepping, and limiting how often you go out to eat or drink.

2. Try to cut the cost of paying rent

Paying less in rent is an obvious solution to freeing up money for a deposit. There are many ways you can achieve this. For some lucky savers, moving back into the parent’s home or a family member is a great way to pay low rent.

Another option is to flatshare, this involves moving in with friends or other individuals in a similar situation or seeking out housemates. Splitting the cost of rent and food multiple times over gives you more room for savings.

A similar option to consider are co-living spaces. You can rent your own bedroom and then share communal spaces such as the bathroom or kitchen with other tenants.

3. Consistently paying towards your savings

It may be tempting to save in large amounts, but it’s more realistic (and kinder to your purse) to save small sums of money every month consistently.

You can create savings accounts specifically for your down payment and nothing else. This will allow you to treat saving as a bill where you can set up a monthly bank transfer of a specific amount.

It is vital that you review your savings account at least once a year to check you’re getting the best rate of interest. Additionally, with house prices fluctuating, keep tabs on the housing market so you are aware of any sudden changes.

4. Use government help services for first time buyers

Government schemes such as the Lifetime ISA (Individual Savings Account) are designed specifically for first time home buyers. The lifetime ISA allows you to save with a 25% yearly government bonus. For example, you can save up to a maximum of £4000 every tax year, and with a 25% bonus you will be saving an additional £1000.

Some key things to know about the lifetime ISA

• You must make your first payment into your ISA before you turn 40 years of age.
• The money from your lifetime ISA can only be used for your down payment - this property must only be purchased with a mortgage.

Help to Buy: Equity Loan

A Help to Buy Equity Loan Scheme is available for those buying a new-build home as a first-time buyer. The applications for the scheme close on the 31st October 2022.

How to know you're eligible:

• You must be a first time buyer
• Able to afford the fees and pay interest

The property you buy with your equity loan should be:

• A new-build
• Sold by a Help to Buy registered homebuilder
• The only home you own and reside in
• Must not have been lived in by anyone before purchasing the property

5. Set a budget and a timeline

To know exactly where your money is going, you should look at itemising your income and spending habits. Consider how much you can afford to save every month, as well as how long it will take you to save the desired amount. This is similar to what a financial advisor does on your behalf.

If the average 7-9 year period is too long for you, then look into increasing your income or reducing your spending. The most reliable way to increase your income is to look for higher paying job roles, or to get a promotion if possible.

Remember: With every pay slip, you pay income tax, and with every salary increase there is a higher rate. You can check whether you are on the right income tax bracket by logging in (or making an account) at the HRMC website.

Other costs you need to consider before you start saving

1. Homebuyer surveys and costs

Homebuyer surveys are important in preventing any unexpected repair costs down the line. The initial survey includes a non-invasive visual inspection of the property to report on the conditions and whether or not there are any defects.

The survey would usually cost between £400-£1425 on average. However, the prices are dependent on the type of property, price and location.

2. Conveyancing solicitor fees

When purchasing a property, legal fees are vital to consider. You’ll need to hire a conveyancing solicitor to handle all legal aspects of buying a property.

Conveyancing solicitors are essential for property transactions, and ensure the completion of sales. You should expect to pay between £300 - £1500 for hourly fees.

3. Financial advisor

A financial advisor will provide you with advice and services based on your monetary situation. For example, helping to cultivate a plan to help buy your first home and analysing your salary and monthly expenditure.

4. Land registry fees

This is a fee for transferring the register to the new homeowner, and is scaled according to the purchase price of the property. The fee is assessed on half the value of the property minus the value of the mortgage.

5. Hiring a mortgage broker

A mortgage broker is an intermediary who can arrange a mortgage between you (the borrower) and the lender. They analyse your financial situation and find the best direct lender for you ensuring your loan application is successful. A mortgage broker requires a fee which can range from anywhere between £300- £600, but this isn’t always the case.

When should you start saving up for a house?

There is no right time to start saving for a property. The process of saving depends on whether you feel both financially and mentally ready. Once the thought of buying a home crosses your mind, it may be worth looking into what it entails.

There is no harm in educating yourself about the process, costs and time. You might not start the task of saving immediately, but you'll thank yourself when you begin your home buying journey.

Research does however suggest that most people in the UK wait until the age of 30 to start saving for a house, although many hope to start saving by 27. As long as you have a stable income where you can afford to put aside some money every month, it may be worth taking that first step towards a savings plan.

Saving monthly does not necessarily mean large sums of money transfers. An effective way is saving in smaller and consistent amounts.

A financial advisor can be a comforting guide through the saving process. An advisor analyses your monthly outgoings to the smallest detail to work out how much you could be saving - without having a detrimental impact on your lifestyle.

Another key component to saving is knowing the end result - what type of mortgage will be available to you. It will depend greatly on your salary, financial situation, and any outstanding debts you may have.

How much should I save a month to buy a house?

For the average first time home buyer looking to buy in the next five years, you will need to save approximately between £400-£500 a month for a 10% ( £29,211) deposit. However, the amount you need to save depends on the deposit. For example, a 20% deposit means you have to save a total of £58,422.

As a first time buyer, you should find a property where the monthly mortgage repayments roughly equal how much you currently pay rent. The average time spent saving for a house in the UK is between 7-9 years. So, for a £58,422 deposit, you may be looking into saving between £600 - £800 a month.

The 7-9 years saving timeline might not be for everyone. However, you can use the tips we’ve provided to make effective changes in your routine, and help you make that property purchase.

Find the best estate agent for you and book a free house valuation today!

Things to be aware of before getting a mortgage

Before looking into buying a home, there are just a few things you need to be aware of to make the process smoother.

1. Credit score matters

Ask yourself how you’ve been spending your money, are you spending outside of your means? If so, it might be wise to invest in a credit card to make small purchases like a budgeted grocery shop.

However, you need to ensure that you pay things back on time, as well as managing bill payments punctually.

2. Keep financial records

You will likely need 33-6 months worth of payslips as evidence of earning before you can apply for a mortgage.

3. Pay any outstanding debts

Debts negatively impact mortgage applications. It is important to pay any outstanding debts on time, as they are a liability on your name.

4. Interest rates

To clarify, interest is something you pay to the lender in return for borrowing money. Therefore, you’ll pay a percentage of how much you have borrowed, which is called an interest rate.

It is important to find a mortgage with a manageable interest rate. Over time interest rates can rise, therefore it is vital that you choose an appropriate option.

Summary: Be patient and consistent

Saving for your first home is a challenging process, but the feeling of owning your first home is worth it. By utilising government schemes like the Lifetime ISA, and creating a fair, but consistent savings plan, you can shorten the process exponentially.