To get a good mortgage deal with low interest rates, you often need a dauntingly big deposit. Follow our step-by-step guide on how to make saving for a house or flat manageable and turn your home-buying dream into reality.
Four out of five Britons would prefer to own their home rather than rent. An estimated eight out of 10 under-30s rely on help from parents to buy their first home. (Source: The Council of Mortgage Lenders)
The average first-time buyer puts down a 20% deposit on their first home, which could mean finding a daunting £20,000 or more.
However, the supply of 90% mortgages is increasing and there are a variety of other ways to reduce your payments:
Checking house prices in the area where you want to buy, and deciding whether any of the options above could be for you, will help you work out the size of the mortgage deposit you’re going to need.
Use our Savings calculator to help you work out how much you can save.
Once you know the amount of deposit you’ll need, make a plan to reach this goal.
Regular saving is more effective than relying on irregular one-off sums.
How long it will take depends on how much you can afford to set aside each month. Be realistic about how much you can afford.
For example, suppose you want to buy in three years’ time and will need £10,000: you’ll need to save around £265 a month.
But, if you only feel comfortable saving £150 a month, you will need to plan on buying in just over five years’ time.
This might seem a long wait, but it is better than trying to save too much and giving up altogether.
Set up a regular payment (direct debit or standing order) to automatically transfer a set amount into your savings each month.
Strike while the iron’s hot! Decide where to stash your savings.
Maybe you already have an online bank account letting you set up a separate pot for your goal. Otherwise, open a separate savings account.
You could opt for an instant access account. But, since it will most likely be some years before you’re ready to buy, you might want to look at accounts tieing up your money but offer better interest.
Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.
We recommend the following websites for comparing savings accounts:
Review your savings account at least once a year to check you’re getting the best rate of interest.
Make sure you use your yearly cash ISA allowance so you don’t pay tax unnecessarily.
Many ISAs tempt you with a bonus for the first few months or year but then fall back to dismal rates.
This article is provided by the Money Advice Service.