How much will you need to buy your first home?
Saving to buy your first property can be daunting - but having a clear and realistic plan can make it feel much more achievable. The first step is work out how much you need to save.
Your deposit is by far the biggest thing you'll be saving towards. It will usually need to cover at least 5% of the cost of the property, with a bank or building society lending you a mortgage to cover the rest.
Generally, the less you earn, the smaller the mortgage you'll be offered – meaning you may need a bigger deposit than 5% to buy the property you want. If you buy with someone else, you’ll be able to apply for a larger mortgage, and potentially build up a bigger deposit.
Find out more about mortgages and deposits:
- How much deposit do you need for a mortgage?
- What is a mortgage?
- Deposit calculator: when will you be able to buy?
Other costs to factor in
|Fee||What is it?||Cost|
|Valuation fee||The mortgage lender will conduct |
a valuation to check the property is worth
roughly what you've offered to pay for it.
|£0-£1,500, depending on the |
terms of the deal and value
of the property
|Arrangement/product fee||The fee for taking out the mortgage.||£0-£2,000, depending |
on the deal
|House survey fee||A professional survey of the property |
to check for structural defects.
|£350-£1,300 depending on |
the value of the property and
type of survey
|Conveyancing fees||Pays a solicitor or conveyancer |
to handle the legalities
of buying the property.
|Search fees||Searches should identify issues that |
might negatively affect the property
you're buying (eg flooding).
|Buildings insurance||This covers you if anything major goes |
wrong with the property. You'll need
to have it in place from the day you
|Money transfer fees||You'll have to cover money transfers |
between mortgage lenders,
conveyancers, buyers and sellers.
|Land Registry fees||Charge for registering yourself as |
the property's new owner.
|Removal fees||The cost of hiring a van or a removals |
company. This will vary depending on
how much stuff you have and how far
it needs to be transported.
|Stamp duty||The tax you'll pay for buying the property. |
If it's your first home and it costs £500,000
or less, you'll get a discount.
|Depends on property price |
- see our stamp duty guide
The amount you’ll be spending on commuting, contents insurance and utilities such as gas, electricity, water and council tax may also change.
Then there’s the cost of decorating and furnishing your new home. This will vary depending on how much work you want or need to do.
Find out more:
Working out how much you need to save can be confusing. For tailored advice based on your personal circumstances, you can speak to Which? Mortgage Advisers.
Your home may be repossessed if you do not keep up your mortgage repayments.
How to save for a deposit more quickly
After working out how much you ideally need to save each month, you should set a plan for how to achieve it. Here are some ideas:
1. Reduce your bills
Perhaps the most satisfying way of saving money is to reduce your outgoing bills. Do this by:
- Switching your energy bills to cheaper tariffs, if your landlord will let you.
- Shopping around for cheaper mobile phone and broadband packages.
- Checking your council tax – if you live alone, and in a few other circumstances, you can get a 25% discount on your council tax bill.
- Cancelling unused subscriptions, eg TV and music streaming, gyms, clubs, newspaper and magazines.
2. Cut down on everyday spending
It might be a cliche but making small changes to your everyday outgoings really can add up over time.
Check your bank statement and have a look at what you're spending on – apps like those from Monzo and Starling automatically break spending down into categories, which makes the process easier.
Perhaps you hadn’t realised that the daily cup of coffee you buy costs you £600 a year, or that you’ve been spending £150 on clothes every month.
Identifying any areas you can cut back on – eg taking coffee from home in a thermos flask, or limiting yourself to one new clothing item a month – can free up substantial amounts of cash to be stashed away in your deposit fund.
- Find out more: 50 ways to save money
3. Earn on the things you do spend on
Use loyalty cards and consider taking out a cashback credit card, which will enable you to earn a percentage of what you spend in the form of credit on your bill.
To max out the benefits of a cashback card you should use it for all your everyday spending but pay off the balance in full every month, as the interest you’ll be charged could outweigh the cashback you earn.
Using a credit card responsibly will also help to improve your credit score - important for when you apply for a mortgage.
- Find out more: best cashback credit cards from Which? Money Compare
A new loyalty card cashback service called Brix Points could also help. Like a Clubcard, you can collect Brix points on a range of everyday purchases ranging from mobile phone tariffs and clothes to groceries and holidays.
The points you earn are converted into their cash equivalent and added to a ring-fenced account. The balance can then be transferred to a conveyancer when you buy your first home, paid into a lifetime Isa, or, if you’re still renting, paid directly to a letting agent or landlord as a rental deposit.
4. Consider a saving/budgeting app
There are a number of apps that will funnel away your spare cash, building up your funds for a deposit.
Some apps, such as Monzo and Oval, can round up your spending to the nearest pound and deposit the difference into a savings account.
Other apps, including Chip, Plum and Cleo, use an algorithm to analyse your financial behaviour and decide how much you can afford to spend.
The downside of these apps is that they don't usually pay interest on the amount you're saving – so, once you’ve saved, you should transfer the funds to an account that does pay interest.
- Find out more: challenger and mobile banks
5. Assess your renting situation
A more dramatic step, but the one that could potentially save you the most money, is changing your current living situation.
Increasing numbers of people saving for their first home are choosing to move back in with their parents. Assuming this move will mean you pay below-market rent (or even none if you're very lucky) and spend less on bills and food, you could save hundreds every month and reach your deposit goal much faster.
Of course, this isn't an option for everyone - but changing how you rent could also save you money.
If you currently live alone, you could save a significant amount on bills and rent by getting a lodger (you'll need to check this with your landlord and may need a new tenancy agreement), or by moving into a flatshare.
If you want to keep your own space, you could consider moving to a cheaper area - though if this would mean a longer commute, check whether the extra travel costs would outweigh the savings in rent.
6. Make extra money
Increasing your income is another way to boost your deposit savings.
There are countless ways you could do this, from freelancing in your spare time or setting up an Etsy shop to renting out games consoles or selling stuff you no longer use.
Be aware that you may have to submit a self-assessment tax return and pay income tax on any extra money you have coming in.
- Find out more: 50 ways to make money
Saving into a Help to Buy or lifetime Isa
In order to see your savings grow, you ideally want to save them in an account offering a rate that beats inflation – otherwise the cash will end up losing value over time.
While there’s nothing wrong with a traditional savings account, if you’re saving a large sum of money you may have to pay tax on the interest your savings generate.
If you deposit your savings into an Isa, they’ll remain tax-free - and, if you save into a Help to Buy Isa or lifetime Isa, you could also get a government bonus of up to 25% on your savings when you buy your first property. The table below shows the main differences between the two types of Isa.
Table: Help to Buy Isa vs lifetime Isa
|Help to Buy Isa||Lifetime Isa|
|How much can |
I pay in each year?
|A maximum of £3,400 in year one |
and £2,400 each year after that.
|Up to £4,000.|
|Can you deposit |
a lump sum?
|No, you’re capped at depositing |
£200 a month, except in the first
month when you can deposit an
|Yes, but no more than £4,000.|
|What is the |
I could receive?
|£3,000 if you save the maximum |
amount of £12,000.
|£32,000 if you save the maximum |
amount over 32 years between the
ages of 18 and 50.
|When is the |
|When you buy a home. The bonus |
is usually paid to your conveyancer.
|What’s the |
|£250,000 in most areas of the UK; |
£450,000 in London.
|£450,000 anywhere in the UK.|
|When can it |
be used to
buy a home?
|Once you've saved at least |
£1,600. This can be done in three
months if the maximum deposits
|You have to have had the |
lifetime Isa for at least a year.
|Who can open it?||Any first-time buyer over the |
age of 16.
|Anyone aged 18-39 – but if you |
want to put the deposit towards
a property, rather than accessing
it in retirement, you'll need to be
a first-time buyer.
|What kind of Isa |
|Help to Buy Isas are only available |
as cash Isas.
|Lifetime Isas are available as both |
cash and stocks & shares Isas.
|How many |
|There are 21 providers listed on the |
government's Help to Buy website –
but it may be worth checking with
your local building society, as some
offer Help to Buy Isas to local
residents and existing customers.
|There are currently 11 lifetime |
Isa providers; two of these
offer cash Isas and nine offer
stocks & shares Isas.
|Are there fees?||No.||There are no fees with a cash |
lifetime Isa, but there are fees
with stocks & shares accounts.
Fees vary between providers.
|Can I withdraw |
money if I’m
|You can withdraw the money at |
any time, but if it’s not used to
buy your first home you won’t
receive the bonus.
|You can withdraw money for |
buying your first home, if you
are diagnosed with a terminal
illness, or wait until you’re over
60. Withdrawing money for any
other reason will result in a 25%
|How long will it |
be available for?
|New accounts are available until |
2019, at which point Help to Buy
Isas are being withdrawn from
|There is currently no end date.|
|Can I transfer |
|You can transfer to another |
Help to Buy Isa. You can also
transfer to a lifetime Isa, but you
can only use the bonus from one
account to put towards buying
|You can transfer to an alternative |
lifetime Isa. If you transfer to a
different type of Isa, you’ll be
charged the withdrawal penalty.
|Can I open more |
|No - you're only allowed one.||You can open more than one |
lifetime Isa, but you can only
open and pay into one each
Saving into a regular savings account
Regular savings accounts often pay attractive headline rates of interest and can be a good way to make sure you're putting money aside every month.
But they often have restrictions that you need to watch out for. For example, there may be limits on the number of withdrawals you can make each year, you may receive less interest if you miss a month of savings and you may need to have a current account with the bank.
- Find out more: compare savings and Isa rates with Which? Money Compare.
Instant-access vs fixed-rate savings accounts
If you already have a small lump sum built up, but it’s going to take you a few years to save up the rest of your deposit, you could get a better rate of interest by locking your money away for a year or more.
You could consider a one or two-year fixed-term fixed-rate savings account for your lump sum, and then use your cash Isa allowance or a regular savings account for the remaining amount of the deposit that you need to accumulate.
- Find out more: Which? Money Compare lets you search hundreds of fixed-rate deals.
Investments when saving for a mortgage deposit
The key to saving for your deposit is to make the most of every penny you save. With savings rates still at record lows, you may be tempted to put some of your money into the stock market to try to achieve a better rate of return.
However, when you invest your money, you put it at risk of falling in value. You'll have the potential to make better returns than the bank, but you could do much worse. It may take several years to recover from any falls in the stock market, setting back your plan to get onto the property ladder.
Saving for your first mortgage?
Call Which? Mortgage Advisers for expert guidance through every step of the mortgage process.
Things to do while you save
While you’re busy saving for a deposit, there are also things you can do to improve your chances of successfully getting a mortgage once you're ready to apply.
Mortgage lenders are more likely to say yes if you:
- Have a regular income and long-term employment
- Have a good credit history
- Are on the electoral register
- Have all your paperwork prepared.
- Find out more: improving your mortgage chances
What to do if you can't save a big enough deposit
Even if you meticulously stick to all of your budgeting plans, sometimes reaching your savings target can remain out of reach. The good news is there are options:
Buy with friends or relatives
It’s becoming increasingly popular for siblings and groups of friends to buy property together.
Some mortgage providers offer joint mortgages to groups of up to four people. They’ll usually only take the income of the two highest earners into account, but everyone is equally responsible for making the repayments.
If anyone wants to leave the property or sell the house, things can get a little complicated, so make sure you take legal advice before buying.
- Find out more: joint ownership of property
Get help from your parents
Many parents want to help their children get on the property ladder, and there are several ways to do this.
Some first-time buyers are in the fortunate position of being offered a cash deposit from their parents, either as a gift or a loan. This will need to be declared to the mortgage provider and you'll need to fill out official documents confirming the arrangement.
- Find out more: Which? Mortgage Advisers' guide to gifted deposits
If a gifted deposit isn't an option, it's worth exploring guarantor mortgages. These enable you to borrow with a small - or even no - deposit, provided your parent or family member offers their property or savings as security against the loan. The family member has to be willing to cover the mortgage if you miss a payment.
- Find out more: guarantor mortgages
Consider a Help to Buy equity loan
If you've saved up a 5% deposit but aren't able to borrow enough to buy a property in your chosen area, a Help to Buy equity loan from the government could help.
How does it work? You put down a 5% deposit, the government loans you a set amount of equity, and you take out a mortgage on the remaining amount.
There are pros and cons to taking out a Help to Buy equity loan so read our guides (via the links above) to find out more.
Look into shared ownership
Shared ownership schemes allow you to buy a share of a property (usually between 25% and 75%) and pay rent on the rest.
The main downsides are that getting a mortgage on a shared ownership property can be tricky and it’s hard to increase your share if the property’s value increases.
- Find out more: shared ownership
Starting to house-hunt
By the time you're ready to start house-hunting, you'll probably have a good idea of the areas you might want to buy in.
If you have a few different places on your shortlist, our area comparison tool enables you to check out house prices, quality of life, schools and more to help you choose the best place to live.
You'll need to register with estate agents before going on viewings, and it could also be worth getting a mortgage agreement in principle (AIP). This is a document confirming that a mortgage lender would be willing to lend you a certain amount, and can be helpful in confirming your budget and proving that you're a serious buyer.
- Find out more: our step-by-step guide to buying a house explains the entire home-buying process simply and clearly.
Want to get a mortgage agreement in principle?
Which? Mortgage Advisers can explain how AIPs work and help you get one.
How to choose a mortgage
Finding the right kind of mortgage for you depends on a range of circumstances, so it’s always worth doing your homework.
There are several different types of mortgage and it's well worth taking professional advice on the best option for you. Don't automatically go with your own bank as they may not offer the cheapest or most suitable available deals.
We'd recommend talking to an independent mortgage adviser, also known as a broker. Look for one that's 'whole-of-market' - this means they can look at all the deals available, rather than a limited range.
- Find out more: how to choose a mortgage broker
Ending your rental agreement
On a practical level, moving from a rented property to the one you're buying can be tricky – especially if you have a fixed-term tenancy agreement and unknown completion date to deal with.
How to end your tenancy
You'll need to check your tenancy agreement, as terms will vary.
If you’re signed up to a fixed-term tenancy, you can only leave early if there’s a break clause, or if your landlord agrees that you can ‘surrender the tenancy’.
Landlords may be more likely to allow this if you can find a replacement tenant, but it is at the landlord’s discretion. Otherwise, you’ll be responsible for paying rent until the end of the tenancy.
If your tenancy has a break clause, this will be stated in the tenancy agreement, along with when the break clause applies and how much notice you have to give.
You need to give your notice in writing and deliver it to your landlord either by recorded post or by hand, unless your contract explicitly states that you can send an email.
If there’s no break clause and your landlord agrees that you can surrender the tenancy, ask them to confirm the agreed leaving date in writing.
If you’re in a fixed-term joint tenancy, you may need to get the other joint tenants to also give notice.
Lastly, if you’re in a rolling tenancy – also known as a contractual periodic tenancy – you can leave at any time, but you must always give notice. How much notice you need to give should be in your contract.
If you’re in the process of buying a property at the same time as having to renew a fixed-term tenancy agreement, explain the situation to your landlord and ask whether they could offer you a rolling contract or a shorter term.
If not, it might be worth moving somewhere with a more flexible contract or even sofa-surfing until you’re in your new home.
When to end your tenancy
You won’t usually need to think about giving notice on your tenancy until you’ve had an offer accepted on a property. Here are some tips on managing the process:
- Have a back-up place to stay – property purchases can often be delayed, so it’s worth thinking about where you'll stay if this happens. Your estate agent should be able to find out how many people are above you in the chain – if it's more than two, be prepared for delays.
- Negotiate your completion date – if you have to give a month's notice on your rental property, ask whether you can complete your property purchase a month after you exchange contracts. This means you won't have to give notice until you know there's no risk of the purchase falling through.
- Make your landlord aware of your situation – depending on your relationship with your landlord, they might appreciate the heads-up that you’re planning on moving and be more flexible if you run into difficulties.
- Have money saved in case you need to pay rent and a mortgage at the same time – sometimes it's unavoidable that you end up buying your home before your tenancy has ended. While having to pay rent and a mortgage is annoying, it’s usually less stressful than moving out of a rented property with all of your possessions before your purchase has gone through.