31 Jan 2022
Tips For Saving For A Mortgage Deposit
Buying a home is an exciting prospect, but with daunting deposits and piles of paperwork, it can seem like a high mountain to climb. But the more you manage to save for a deposit, the better mortgage deal you can get. So it’s best to try and save as much as you can to pay off upfront.
Mortgages Online are here to help you with our top tips on how to save as much as possible for your mortgage deposit. If you require further professional mortgage advice, please don’t hesitate to get in touch with us directly.
What is a Mortgage Deposit?
A mortgage deposit is the amount of money you need to pay upfront when purchasing a house. The more expensive the house is, the larger the deposit you’ll need.
If you are looking at purchasing through the Help to Buy Scheme you’ll only need to save for a 5% deposit, and even if not, there are a handful of lenders who now offer products at 95% Loan-To-Value, (LTV).
To get the choice of all lenders, you would need at least a 10% deposit.
Reduce Bills Wherever Possible
The best place to start is to look at everything you’re paying out for. Put a list of everything that comes out of your bank monthly, such as rent, phone bills, electrical bills, food, subscriptions etc. What are the essentials and what can you live without for the time being? Look at ways of minimizing these bills, such as getting a smart meter, look around for cheaper phone packages and cancel any subscriptions you don’t use or don’t urgently need.
Cut Down on Spending
Following on from the previous point, have a look at how much you spend each month on everyday things such as daily coffees, eating out, shopping etc. Many online banks have the option to view this type of spending on your banking app. This allows you to work out how much you’re spending each month on things you can do without. Make a decision on how much you’re willing to spend, and put the rest away so you’re not tempted.
You can make some changes to your daily routine to help, like making your coffee at home instead of heading to Costa and limiting the amount you spend on new clothes and takeaways. All of these changes added up will help you save a larger deposit!
Read on: How to Boost Your Chances of Getting Accepted for a Mortgage
Put Savings Into a Lifetime ISA
For those who don’t have an existing Help to Buy ISA, (now discontinued), or Lifetime ISA account, saving for a deposit is the perfect opportunity to open one. The government will put a percentage towards your deposit, depending on how much you save in the account. (We explain all the differences between the two types here!)
If you don’t want to set this up, why not shop around for a savings account with good interest rates? That way you can make the most out of your savings by getting interest added over time, increasing your deposit possibilities.
Set Up A Direct Debit
If you don’t trust yourself to put a certain amount of money away every month, it might be a good idea to set up a direct debit. If you set up a standing order on payday to make sure money is being put into your savings, then you won’t have to remember to do it yourself every single month. This makes it much more likely that you’ll continue putting money away into savings.
You don’t want to go in blind when it comes to saving. Work out how much you need to save in total and by when, that way you can set goals each month. Make sure these goals are manageable and realistic, otherwise you’ll end up feeling disappointed and stressed if you can’t reach the target you’ve set. Take into account how much you usually spend per month and how much you can put towards your savings instead.
Sell Things You Don’t Need
Moving home is the perfect time to declutter, so when you start to rummage through your belongings, put together a pile of things you could sell. You can then use this money towards your savings. Why not focus on a different room in your house every month and spend that month posting your unwanted things online, such as Ebay, Depop, Facebook Marketplace etc.
Budget, Budget, Budget
Planning is key when working towards a goal. As soon as you decide on your goals, how much you need to save and when your deadline is, you should put a budget in place. Take an indepth look at your finances, everything you need to pay out for and how much is left after this. You can then budget yourself with a certain amount to spend per month on going out, and how much you want to put away per month.
With a plan in place, you’re much less likely to spend your money on things you don’t need, making your goals more attainable and likely to be reached.
Hopefully these tips have helped kickstart some ideas on how to save for your mortgage deposit. If you need any more professional mortgage advice, feel free to get in touch with us at Mortgages Online. We would be more than happy to help you find a mortgage suitable to you.