Tips on how to save for a house

What deposit size do you typically need?

When saving for a house deposit, the exact amount required often depends on the lender and the applicant’s circumstances. Many UK mortgage lenders expect a deposit of around 5-10% of a property’s value, but this can vary.

Does a larger deposit help?

Lenders may look at larger deposits, such as 25%, more favourably than the minimum of 5-10%. This can be for reasons such as:

• It reduces the amount borrowed

• It lowers your loan-to-value (LTV) ratio

• You may be able to access a wider range of mortgage products

• Lenders see a longer-term pattern of saving

• Your monthly mortgage payments may be lower than they would be with a smaller deposit

First time buyer deposits

First time buyers may be able to apply for mortgages with a deposit as low as 5%, but this depends on specific lender criteria. Some mortgage lenders might prefer first time buyers to have a deposit of 10% or more, as this usually lowers the lender’s risk and demonstrates saving ability – increasing the likelihood of repayment reliability.

Why is saving for a deposit important?

Saving for a deposit is often an important step in the home buying process. A higher deposit means borrowing a smaller proportion of the property’s value, which might result in lower monthly mortgage payments and potentially less interest paid over the term of the loan. Overall outcomes will depend on interest rates, mortgage terms and the type of product chosen.

Tips to help you save for a deposit

There are different approaches to preparing your finances for buying a home. Not every method suits every buyer, but understanding the options can help.

Understand your finances

Looking at your monthly finances can help to decide whether there is potential for savings. To understand your finances, you may want to:

• Review your monthly income and regular outgoings

• Identify patterns in everyday spending

• Look back over recent bank statements to see where you spend your money

• Check whether any recurring payments or subscriptions are no longer needed

Create a budget

Knowing your budget, including how much you can comfortably save each month, can be helpful when saving money for a house. You could create your budget by:

• Listing all sources of income

• Setting out essential costs, such as rent, utilities and travel

• Estimating a comfortable amount to put towards savings

• Revisiting your budget regularly to reflect any changes in circumstances

Set up automatic saving

Some buyers use automatic transfers to move money into a dedicated savings account shortly after payday. This approach can see your deposit fund grow gradually, without needing separate manual transfers each month. Even smaller amounts can accumulate over time, especially when compounded by interest from a chosen savings account. The rate of growth depends on interest rates and account terms.

Cut back on discretionary spending

It might be possible to cut back on certain luxuries to save money for a house. This can include:

• Subscription services. Decide which subscription services are useful and which ones you no longer need

• Eating out. Cut down on eating out and takeaway food, and instead cook at home to help you save

• Impulse purchases. Limit impulse purchases, particularly higher-value, items to help lower unnecessary spending

• Lower-cost alternatives. Opt for supermarket own brands to aid in saving some extra pennies

Choose the right savings account

The type of savings account chosen can impact how quickly your deposit grows, especially over several years. It may help to:

• Compare interest rates across different providers

• Check withdrawal restrictions or notice periods

• Look at regular savings accounts that reward consistent monthly deposits

• Consider tax-free options, such as certain types of Individual Savings Accounts (ISAs), where suitable

Keep track of your spending

Using banking apps, budgeting tools or simple spreadsheets can provide a clearer picture of everyday spending. Categorising transactions might highlight areas where small adjustments could free up extra money to put towards a deposit. Ongoing tracking also makes it easier to see whether spending is aligning with the chosen budget over time.

Government schemes that can help boost your savings

Personal savings often play a part in deposit plans, but some buyers, including first time buyers, also consider government-backed schemes. These schemes are intended either to increase savings through bonuses or to reduce the deposit and borrowing required to purchase a home. Eligibility rules and terms and conditions vary.

Lifetime Individual Savings Account (LISA)

A Lifetime ISA (LISA) is a type of tax‑free savings account aimed at adults saving for their first home or for retirement. You can pay up to £4,000 per tax year into a LISA, with the government providing an additional 25% bonus of up to £1,000 per year.

Funds in a LISA can be used towards the purchase of a first home if certain conditions are met, including price limits and property location in the UK. Withdrawals that don’t meet these conditions may be charged. Using a LISA is one route some buyers follow when deciding how to save money for a house over the medium term.

First Homes scheme

The First Homes scheme in England offers eligible first time buyers, including some key workers, a chance to purchase certain new-build homes at a discount of at least 30% compared with market value.

Local and national eligibility criteria apply, and availability depends on participating developments. The scheme may reduce the deposit required, as the purchase price is lower than the full market value.

Shared Ownership scheme

Shared Ownership allows buyers to purchase a share of a home, typically between 10% and 75%, and pay rent on the remaining share. The remaining share is usually owned by a housing association, developer or local authority. When paying a deposit for a Shared Ownership property, buyers pay based on their share price rather than the full property value.

Over time, many Shared Ownership buyers increase their share through a process known as staircasing. Staircasing allows buyers to purchase more shares in their Shared Ownership property, sometimes up to full ownership depending on the terms of the lease and scheme rules. You can buy a Shared Ownership property through developer schemes such as Home Reach.

Accounts and tools that can help you save

Different financial products and tools might support those working out how to save up for a house.

Cash ISAs vs Stocks and Shares ISAs

There are four types of ISAs, including cash ISAs and stocks and shares ISAs. A Cash ISA is a tax-free savings account where money earns interest at a fixed or variable rate. The balance is not linked to stock market performance, so this option is often seen as lower risk, although interest rates and account terms still vary.

A stocks and shares ISA is an investment account used to buy assets such as shares, bonds or investment funds. Any returns are free from UK income tax and capital gains tax. The value of investments can fall and rise, particularly over shorter periods.

High-interest savings accounts

High-interest savings accounts are designed to offer a higher Annual Equivalent Rate (AER) than many standard accounts. AER is calculated as percentage and indicates how much interest you’ll receive on your savings. AER makes it easier to compare how much interest could be earned over a year, assuming the rate remains unchanged.

Common types include:

• Regular savings accounts, often with monthly deposit requirements

• Fixed-rate bonds, where money is locked away for a set term

• Easy-access accounts, where funds can usually be withdrawn more flexibly

The choice between these options often depends on whether the saver needs quick access to their deposit fund or is comfortable fixing money away for a certain period.

Budgeting apps

Budgeting apps and online tools may help track spending and work towards savings goals. Many apps categorise transactions automatically, show trends and offer features such as rounding up card purchases to the nearest pound and moving the difference into a savings account.

For some people exploring how to save for a house, these tools provide a clearer view of their progress.

Expert insight: how buyers should structure their savings

Our mortgage expert Terry Higgins shares how buyers might want to structure their savings:

‘Buyers often split their savings between different accounts. One approach involves keeping part of the deposit in an easy-access savings account for flexibility, while placing the rest in accounts that may offer higher returns such ISAs.

‘Some first time buyers might also factor in government-backed schemes, such as LISAs or the First Homes scheme, when deciding how to save for a house.’

What to consider before you start house hunting

There are a few things to keep in mind before you start on your house-hunting journey, such as:

1. What your deposit target is and whether you have a preferred property price range
2. If any outstanding issues with your credit report have been resolved, or need to be addressed
3. If you’ve outlined a monthly budget, including a regular saving amount
4. Whether you’d be eligible for a government-backed scheme, and how much that could potentially save you
5. If you need to finalise your borrowing capacity through mortgage calculators or lender information

Explore our range of new build homes across the UK. Contact our Sales Advisers to start your home buying journey today.