Saving for a deposit is an essential part of the homebuying process for first-time buyers, and the speed at which it happens is dependent on a number of factors.
The price of the property, the income of the buyers, the size of their savings account and the mortgage they take out are four of the biggest considerations, all of which combine to create a degree of uncertainty and, sometimes, confusion.
However, help is at hand for those who are saving to buy a new home, as the Money Advice Service (MAS) has some top tips to help build a deposit and speed up the buying process.
Consider the options
There are plenty of options available to prospective housebuyers, which can help to provide a degree of clarity when weighing up the possibilities.
Chief among the considerations is the value of the property, as this will have an effect on the size of the deposit required and may even determine which area or development you move to. Sometimes similarly-sized houses in different areas can vary greatly in price, and if you have a specific deposit in mind, it may need you to adjust your requirements to choose between house size and area.
The type of mortgage you choose and lender you decide to go with will also have a bearing on your deposit. The Avant Homes mortgage calculator and guide to choosing a mortgage can both prove useful in deciding which option to go for.
There are two ways to save for a deposit – making a weekly or monthly commitment to put a certain amount aside, or simply starting a pot and then contributing as much as you can or are willing to put away, whenever you can do so.
If you are buying a house with your partner, a joint account could be the best option, as it will track your combined contribution. If you would rather do things down the middle, then it may be best to create separate pots and agree on a certain amount that you will both put away each month, to avoid any differences down the line.
Another recently launched option is the Help to Buy ISA; a government-backed initiative that enables borrowers to save up to £200 a month towards a house, and £1,200 in their first month, with the government then adding 25 per cent tax-free to whatever is in the ISA when you use it for a deposit. The maximum government bonus available is £3,000 and the minimum is £400, which means you would need to save at least £1,600 before you can claim your bonus.
Thinking long-term is essential if you are to reach your goal, so consider how much your specific deposit would need in terms of monthly contributions. A £20,000 deposit would require a £530 contribution each month for three years, for example. The MAS savings calculator can help you to work out how much you need to pay.
As with any end goal, the key to success when saving for a deposit is to be dedicated for the duration. This may occasionally mean sacrificing certain luxuries in your life, but if that £100 hair restyle is reduced from every one month to every three months, it can help you to reach your full deposit amount so much faster.
Vigilance is also key; not only on factors such as mortgage rates, but also account interest rates. Don’t be afraid to switch banks if your savings can make more money elsewhere - every penny counts.
Also remember that your family are there for a reason; not only to support you emotionally, but financially. Even if withdrawing from the bank of mum and dad is not an option, they can help in other ways, such as being guarantors for your mortgage - which can help to secure a bank loan - or simply in spurring you to hit your monthly savings target.
Ultimately, saving for a deposit needs a long-term mindset, but try not to lose sight of the end goal: your brand new home. Keeping this in mind will make the process so much easier, and so much more worthwhile when you achieve your goal.
The Money Advice Service offers free and impartial advice to help people manage their money. Resources and other information are available at https://www.moneyadviceservice.org.uk/.