How much deposit is really enough for your first property?

There are several costs of buying a house in the UK, with mortgage fees and charges, valuations, surveys, conveyancing, and removals all needing to be accounted for in your budget.

The biggest cost that goes hand-in-hand with purchasing a property however has to be your deposit. Whether you’ve saved a big enough deposit is one of the main considerations when buying your first home in 2022, but how much deposit is enough for your very first property purchase? In this blog post, we answer that all-important question.

Why is a healthy deposit important?

As one of the costliest purchases you’ll ever make in your life, purchasing a property can be a daunting prospect for many. Team this with the fact that you’ll be making a huge commitment to repay its cost for the long term, and the pressure can be difficult to bear. That is unless you secure a great mortgage deal.

The burden of purchasing and paying for a property of your own becomes a little less with a decent mortgage product in tow. Securing a better mortgage deal comes down to several factors, one of which is a healthy deposit.

A healthy deposit lowers the risk you pose as a lender. It also gives you the power to negotiate even better mortgage interest rates and with this, you’ll enjoy lower monthly repayments. Saving for a deposit is a great practice that mentally prepares you for the obligation of settling monthly mortgage repayments for the long term too.

What is a good amount of money to save?

If like the vast majority of property purchasers, you don’t have cold hard cash, to purchase your entire property with, saving a deposit and securing a mortgage deal will certainly be the way forward.

100% mortgages – where you pay no deposit – are increasingly rare due to the pandemic. We’d recommend saving a minimum of 5% of the property value to obtain a better mortgage product, whether it’s a deal that offers lower monthly repayments or a slightly shorter term.

This means that if you were looking to purchase a property at the average UK house price of £271,000, you’ll need to save a deposit of at least £13,550.

If you can save more towards your deposit, do just that! The more you can save, the better loan-to-value mortgage you can get, which means better affordability for you for the long haul.

How can I save a decent house deposit?

There are many little and big changes you can make to your lifestyle to save for your house deposit. Taking a closer look at your monthly expenditure is a great place to begin, with information regarding your daily or weekly expenses proving invaluable when devising a realistic budget.

Renting more affordable accommodation (or considering a flatshare) while you save can cut your monthly expenses drastically, giving you more money to set aside for your deposit. Looking at how you can reduce your bills is another way to lower costs and save more.

Those smaller daily and weekly expenses are well worth rethinking too, as Seen in the City describes:

“The pennies do well and truly add up. If you’re serious about finding more money to save, then focus on cutting your daily and weekly costs. These are easier to cut than major bills with minimal effort and some bright thinking. Common examples are weekly shops, nights out and lunches at work. You’ll be surprised how much you can save from your minor spending if you do some planning.”

Comparing the mortgage market with the help of our independent mortgage advisors is also recommended, and will give you a clearer idea of how much deposit you need to save for a great mortgage deal.

Speak to an expert today to get that property buying ball rolling!

Image: Sureeporn Teerasatean / Shutterstock.com