With some lenders asking for deposits in excess of 20%, many borrowers struggle to see how they can save money, especially if they are currently renting.
But that doesn’t mean saving is impossible. We’ve helped hundreds of people onto the property ladder – even those who previously thought they couldn’t afford to save a mortgage deposit.
In this article we’ve given you handy tips on how you can:
Visit the deposits section of our website if you’d like to understand more about the technicalities of the rules around mortgage deposit. From information around the required proof for deposits to information on gifted deposits, concessionary purchases and when you can use a loan to cover your deposit.
Living frugally doesn’t necessarily mean that you have to eat from bins – (it’s called Freeganism and yes, people do this.)
There are lots of other way that you can save money on your weekly shop.
It’s easy to develop shopping patterns and habits but this can be a fast way to waste money on items that could be priced cheaper elsewhere.
A way to easily save money on your food shop, is to buy reduced items. Fresh fruit and vegetables are commonly sold in the reduced section at a fraction of their usual price and can be frozen for up to three months.
Websites such as Approved Food, solely sell out of date products in a bid to reduce waste, so you can save money whilst also saving the planet.
Before you buy anything online, search for a coupon. A quick Google search takes 2 minutes and usually you will find a coupon for a either a discount or free delivery.
If manually searching for coupons isn’t your thing, download the Google Chrome extension Honey. This ingenious little add-on finds you the internet’s best discount codes and automatically applies them to your basket.
This might sound obvious but going through your monthly budget can highlight any areas where you’re trickling money away.
Set up a simple Google spreadsheet and add your monthly income versus your outgoings.
A top tip to save you time is that most online banking platforms will allow you to download your monthly spend as a spreadsheet.
Scan through your spending habits and you’ll be surprised at how much you might be unnecessarily spending.
Another tip if you have online banking, is to look at your monthly direct debits. Many people sign up to free trials for streaming services and monthly subscriptions and forget about them. If you don’t need it, cancel it.
If you do sign up to a free trial, take note of the end date and set an alarm in your phone to remind you to cancel.
Utility bills are ever increasing yet thousands of people neglect to switch or save money. This is one of the most effective ways to cut down your costs to help save for a mortgage deposit.
The amount you spend a month on rent can have a huge impact on your finances and will probably be your biggest monthly outgoing.
Living in a modern house has its benefits but consider whether you could move to a smaller, cheaper property such as a flat. Moving to a property with rent costs that are £100 less a month than your current property, could save you up to £1,200 a year.
You could also consider temporarily house sharing. Rather than renting a whole house, rent a room.
Making compromises on your rented accommodation could significantly reduce your outgoings.
If you already own your own home but need to save money in order to move, you could rent a spare room out for extra income.
Depending on the location and condition of your property, you could charge between £300 – £400 for your room.
Over a year, this could help you to save a whopping £4,800.
The government Equity Loan scheme was introduced to help first time buyers get onto the property ladder with a larger deposit.
Essentially, if you have a 5% deposit, the government could provide a further loan of up to 20% through the Homes and Communities Agency (HCA).
This gives lenders the peace of mind to lend larger mortgages and with a combined deposit of up to 25%, you will then have access to more attractive mortgage rates from lenders participating in the scheme.
*The Help to Buy: ISA scheme closed on 30th November 2019. For up-to-date information including alternatives, read our guide.
If you are a first time buyer, aged 18 or over, you may be eligible for a Help to Buy ISA.
This type of savings account will help you to increase the size of your deposit as for every £200 you deposit into the account, the government will give you a bonus of £50.
In fact, the government will give you a maximum of £3,000 towards your first property and if you’re buying with a partner who is also a first time buyer, they could open an account and receive a government bonus of up to £3,000 too.
If you are still unsure whether you can afford to save a large deposit, Shared Ownership may be an option for you.
This government scheme allows borrowers to buy a percentage of a property (between 25 and 75%) and pay rent on the share that they do not own.
Although you will be required to pay a 10% deposit, the amount you pay is significantly reduced as you will need a smaller mortgage.
For example, if you want to buy a home worth £200,000, you could buy a 25% share (£50,000.)
A 10% deposit would be £5,000, meaning you would need a smaller mortgage of £45,000.
Navigating your way through your options can be overwhelming but there are services and groups that offer free advice on savings, money and mortgages.
And, of course, we are always happy to help with any queries regarding mortgage deposits.
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