A house deposit is a lump sum of money that you pay towards the cost of a property.
If you’re not pursuing shared ownership (where no deposit is required, see below for more info) you’ll need a deposit to get a mortgage.
Always think of your deposit as a percentage of the total cost of the property you're purchasing. For example, if you saved £20,000 for a £200,000 house, you’d have a 10% deposit. This means you’d need a 90% mortgage.
Generally, a larger deposit means smaller monthly mortgage payments, since you owe less. While a bigger deposit is better, don't stretch yourself beyond your means.
You don’t need a 10% deposit to buy your first home!
Some lenders will let you borrow up to 95%, meaning you will need a 5% deposit.
Here are some of Mortgage Solutions Belfast’s top tips for saving towards your deposit:
Be a thrifty shopper
Some simple meal planning will help you reduce food and money waste. Spend half an hour every week planning the week ahead and write your shopping list to fulfil that menu.
General browsing is also best avoided. Go with a list and stick to it or, better still, use online delivery or ‘click and collect’.
And whatever you do, don’t shop hungry! Supermarkets are designed to make you buy things and are very good at it. When you’re hungry, you buy more.
Before you buy anything online, search for a coupon or voucher code. A quick Google search takes 2 minutes and usually you will find a coupon for a either a discount or free delivery.
Consider your current debt
It’s important to assess your current debt as well. Are you paying high interest rates on an overdraft, credit card or loan? Saving money while paying interest can feel a bit like shovelling snow while it’s still snowing. So, it may be a good idea to pay off your debt first.
Many credit card companies offer 0% interest for up to 24 months so it’s worth considering transferring your balances onto a better rate. This can reduce the term significantly, meaning you’ll clear off your debts quicker and have more money to put towards your savings.
Live within your means
Taking a good look at your spending patterns may help you find ways to save more. Remember that even small changes – like buying cheaper brands or swapping taxis for buses – can make a big difference in the long-term.
Set up a simple Google spreadsheet and add your monthly income versus your outgoings.
Scan through your spending habits and you’ll be surprised at how much you might be unnecessarily spending.
Comparing and switching suppliers takes minimal effort and could save you hundreds of pounds a year - money that could be put by to save money for a mortgage deposit.
Monthly standing order
Saving for a house deposit is much easier if your break down the total figure into smaller more achievable lumps. Commit to saving a set amount per month and set up a standing order to a savings account and set up the monthly debit day so it's just after you've been paid.
Knowing the amount you need to save in order to get the deposit you want is a helpful motivator. If you need £15,000 and want to buy a house in 2 years, that's £625 a month that needs to be saved.
Knowing your income and outgoings and figuring out the maximum amount you can spend to hit your savings goal, will help.
Consider shared ownership
Not everyone will be in the position to save for a deposit but that doesn’t mean you can’t buy your first home. We can get you mortgage ready with shared ownership through both N.I.C.H.A. and FairShare, meaning you won’t need a deposit at all.
A good mortgage broker will be happy to go through your budget with you and help with a savings target, as well as some borrowing and affordability calculation.
How we can help
At Mortgage Solutions Belfast, our mortgage advisors don’t just find a mortgage for you - we can help you put together a budget before you’ve even started looking at properties and guide you through the whole process. Don’t let the size of the deposit put you off - get in touch today to find out how we can help you afford your first home.
Call us on 02890 642000, send us an email or contact us through social media.