7 Easy Ways to Save a Deposit for a First Home

Many people dream of no longer living with their parents or throwing money at their landlord every month and instead buying their own home. However, one of the things that often stands in the way of first time buyers is raising a deposit. The average house price in the UK is £281,000* according to the ONS, and most mortgages require at least a 5% deposit, so that’s a large amount to save.

*Latest ONS Data to April 2024

7 Easy Ways to Save a Deposit For Your First Home

With this in mind, here are some ways you can raise the cash to get on the property ladder.

1. Look carefully at your outgoings

While you may think you’re living quite frugally, most people have some areas where they can cut back a little. For example, if you buy a £3.75 takeaway coffee every working day, that works out at £75 a month or a whopping £4,875 over five years. Even chipping away at these small expenses can improve your finances, and when it comes to applying for a mortgage, you can show that you have a pattern of sensible spending.

One big outgoing that non-homeowners have to deal with is rent. While it’s not the most fun solution, if you can move back with your parents for a year, then you could put away more cash. The loss of freedom may be worth it if it means you aren’t stuck in rented accommodation for years to come.

2. Get a side hustle!

Many people now have a full-time job and a side hustle, which is something they do in their spare time for a little extra cash. Side hustles are often something that’s creative or a little more interesting than your day-to-day job, from selling handmade items on sales platforms like Etsy to creative writing. But if you don’t have a particular skill in these areas, then you could always consider selling items on eBay or Vinted, evening bar work, or anything that fits in with your work schedule. Remember there may be tax implications with side hustles, depending on how much you earn, so it's important to explore these options thoroughly.

3. Ask for family help

According to The Guardian, the proportion of first-time buyers relying on help with deposits from their parents has risen from 27% to 37% in a year. If your parents have the savings and are willing to give you money towards your deposit, then you will no doubt be pleased to take it. However, you need to consider the impact on your mortgage application. Mortgage lenders will still want to know that you can afford the mortgage repayments and will need a signed declaration from your parents that the money is a gift, and you aren’t going to be paying them back.

If your parents don’t have the savings to help you with cash, they may still be able to give you a helping hand onto the property ladder. For example, some banks offer 100% mortgages that are secured against your parent’s home. However, it’s important that you do your research before you take out this sort of product as it is a huge commitment. With access to over 12,000 mortgage products from 90+ lenders, The Mortgage Experts can help find the right deal for you.

4. Move money out of your account on payday

Many people wait until the end of the month, see what’s left over in their current account, then transfer that into their savings account. However, a better way to save is to work out what you need to live on for the month, with a little cushion for emergencies, then set up a regular payment into your savings for anything left over on payday. This means you’re more likely to live frugally throughout the month.

5. Move to a cheaper area

If rent, travel and other outgoings are wiping out your income each month, a solution may be to move to a cheaper area whilst you save for your deposit. Living in a trendy or central location can definitely add to your quality of life, but it can also significantly slow down your saving progress. Consider exploring suburbs or smaller towns that offer a more affordable housing market. While the commute might be a little longer, the savings you accrue can make a huge difference in reaching your deposit goal faster. Remember, you can always revisit the idea of moving to a more expensive area once you've established yourself on the property ladder.

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6. Lock away your savings

When interest rates are high, it’s worth considering taking out an ISA (Individual Savings Account). These products allow you to save tax-free, and if you choose an ISA where your money is locked away, with penalties for early withdrawals, you’ll usually get a far better interest rate. This can also stop you dipping into your savings.

7. Buy with a friend

Getting on the property ladder can be tough if you’re single. It’s slightly easier if you’re a couple with two incomes, as you can both save and the mortgage will take both incomes into account, but you don’t have to be romantically involved to share a mortgage! Ideally, it should be someone you’ve lived with before, perhaps a long-term roommate, and someone who is financially responsible and you’re potentially happy to live with for years!

Get Help Planning Your Deposit Savings And Staying On Track

If you want to get on the property ladder, there are many ways that you can do so. Whether you make small or large lifestyle changes to get there, it will be worth it in the end.

For impartial first time buyer advice contact our knowledgeable team at The Property Experts.

Your local Property Expert is available 7-days a week. Contact us to arrange a valuation, call 0330 179 8180 or email hello@thepropertyexperts.co.uk for a chat.

You may also be interested to read 3 First-Time Buyer Mistakes and How to Avoid Them

In the meantime, we've answered some of your common questions about how to save for a deposit.

Frequently Asked Questions About How to Save For a Deposit

Can I save for a mortgage deposit while still paying rent?

Yes, it's entirely possible to save for a mortgage deposit while continuing to pay rent. Explore ways to save money effectively while meeting your monthly rental commitments.

How can I maximise my savings for a house deposit using traditional savings accounts?

A traditional savings account offers a secure way to save for a mortgage deposit. Look for accounts with competitive interest rates to grow your savings towards your property deposit.

Why is a good rental history important to mortgage lenders?

Maintaining a positive rental history demonstrates your ability to manage monthly payments, which can enhance your credibility with mortgage lenders when applying for a property deposit.

What role do property prices play in saving for a mortgage deposit?

Property prices impact how much you need to save for a mortgage deposit. Keep an eye on market trends to set realistic goals for your property deposit savings and future property purchases.