How Much Deposit Do I Need for a House?

If you are looking to buy a house in the UK, there are some things that you need to ask yourself so you will have a guide in your search.

Perhaps one of the first things to consider is how much deposit do I need for a house?

This way you will have an idea of the timeline that you are going for.

Knowing the area of where you want to buy a property is also an important aspect as well as knowing what you want for your house.

Determine if you want something that is ready for move-in or a house that needs some work.

Are you also open to changes and compromise some items in your list?

To make house hunting more convenient, you may search for an estate agent that you can trust and one who is reliable. Also, with this is finding the right solicitor because they will be the one to handle all the legal work, so they are a crucial part of the home buying process.

Express how much you can and are willing to pay for the property and also inform the parties involved about your conditions if you have any.

How Much Deposit Do I Need to Buy a House?

money to buy a house

To give you a better position to purchase a house, you must have at least 5% of the total property price to use as deposit, though this is just a minimum.

The average is from 5% to 15% deposit, but having more would be best. An example would be a £200,000 property, 5% deposit for this would cost £10,000 while a 10% deposit would be around £20,000 and a 15% would be £30,000.

Saving more money to come up with a much bigger deposit has several advantages which is why if you have the opportunity for this, then it is best to go for it because if you have a bigger deposit, your monthly repayments would be lower.

Apart from lower monthly repayments, lenders will also offer you better deals in terms of interest rates and your mortgage application will more likely be accepted. There is also a chance for the lenders to boost your loan of up to 4x your salary per year if you have a larger amount of money to use in your deposit.

How to Save for a House Deposit and How Long Does It Take?

When figuring out about how much deposit do I need for a house, the first thing you can do is to review your finances closely.

Determine the incomings as well as the outgoings, and from there you can start creating your budget.

There are some budgeting and banking apps available in case you are finding it difficult to start. Part of making a budget is cutting on those little luxuries and sticking only to the essentials in your daily living. For this part, only you will be able to decide which items can stay in the essentials list and what items can go for the meantime.

Avoiding debts with high interests and replacing them with 0% balance transfers can also help you minimize the interest that you are paying thus giving you more room to save. You may also consider placing your savings into a savings account that would yield a higher interest.

Ask your bank for their savings options that may work well with your situation. You can also try selling the things that you do not need any more through eBay, Gumtree, Shpock, Depop, etc. Another option is if you have friends or family members who have extra cash and are willing to lend you money, or they can also lead you to a guarantor mortgage.

how much money to buy a house

There is no exact time for how long it would take you to save because it is really all up to you and how much you can afford to save for your house. It can be as short as two years or as long as 15 years. If you are looking to save for a 5% deposit of £11,000+ for a £200,000+ property, saving a minimum of £200 monthly may take you 5 years to complete your goal.

And if you already have some savings, you could try boosting it through Lifetime ISA which allows you to save for up to a maximum of £4,000 annually tax-free and the government will top up your money with a 25% bonus.

Another way is through Help to Buy ISA which allows you to save for up to £2,400 annually and the government adds 25% to your money up to a maximum of £3,000. Some options to consider are reducing your rental costs, getting a housemate, or moving back to your parents’ house!

Mortgage with Small Deposit or With No Deposit

It is possible to get a mortgage without any deposit through 100% LTV mortgage. The downside to this is that the interest rates are very high and it is not usually recommended by lenders as this option is typically reserved for their current clients or for those with guarantors. 

For a mortgage with a small deposit, it simply means higher monthly repayments for you. You may get assistance from the government through their Help to Buy programs which include the one with an equity loan. If you have at least 5% deposit, you may be eligible for the Help to Buy Equity Loan where the government will loan you up to a maximum of 20% of the house value; and 40% if you are in London. This is interest free for 5 years.

Possible Help to Get a Mortgage Deposit

Getting help for a mortgage deposit is possible through different avenues which can be either from the government or other streams.

From the government, you may avail of their Help to Buy Equity Loan scheme or the Help to Buy ISA or the Help to Buy Shared Ownership programs.

For other options, there are some new builds that offer property discount, and there are also options in the bank where relatives of first time home buyers can add 10% to their deposit. Lastly, there is the guarantor mortgage where a family member or a friend can vouch for you by using their asset or money as a form of security on your behalf.