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How to Save for a Mortgage Deposit


Written by Reviewed by Emma Lunn

19th Feb 2020 (Last updated on 14th Mar 2024) 12 minute read

One of the biggest hurdles when it comes to buying your first property is saving for the deposit, which is often a considerable amount of money - usually 10% of the price of the property.

Without a doubt, creating and sticking to a budget is one of the best ways to save for a deposit. But beyond that there are a few steps you can take to get you closer to your goal.

Compare My Move have worked with property experts to bring you up to date advice on saving for a house deposit. This guide will cover why you need a deposit, how much you need to save to buy a home and how you can save for a deposit effectively. We will review the government schemes offering helpful bonuses and boosts to your savings.

  1. What is a Mortgage Deposit?
  2. How Much Will You Need to Save?
  3. How Do I Create a Budget?
  4. How Can I Boost My Savings?
  5. How Can I Save for a Property While Paying Rent?
  6. What Sort of Savings Account Should I Use?
  7. Can I Use a Loan as a Deposit?
  8. Help to Buy: Equity Loan
  9. Help to Buy: Shared Ownership
  10. Financial Help From Family Members

What is a Mortgage Deposit?

Your deposit is the percentage of the property price which is paid upfront, with the remaining amount borrowed as a mortgage. The more deposit you put down, the less mortgage you will need to borrow. For example, if you put down a 10% deposit, you will need to pay back 90% of the property value as a mortgage.

How much of the property’s value you borrow is known as the loan-to-value (LTV). When mortgage lenders advertise mortgage products, it will state the maximum LTV allowed. For example, if you have a 20% deposit and so need to borrow 80% of the property’s value as a mortgage, your LTV will be 80%.

The lower the LTV, the cheaper mortgages become. This is because lower LTV mortgages represent a lower risk to the lender. This means that the bigger the deposit you can save, the more choice of mortgage products you will have, and the cheaper your mortgage rate will be. If you're buying a house with someone else, saving for a deposit will be easier.

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How Much Will You Need to Save?

You will need a minimum 5% deposit, but you’ll get a much wider choice of deals if you can save 10% or more. In the past, some lenders offered 100% mortgages which didn’t require a deposit but these are very rare now.

The amount needed for a deposit will depend on the asking price and the amount of mortgage your chosen mortgage lender approves. How long it takes for you to save for a deposit will depend on how much you can afford to set aside each month, so be realistic about what you can afford.

Make a clear and achievable plan for how much you need to save and how you plan to do so. Don’t forget that alongside the deposit, you will need to ensure you have saved enough money to cover the full cost of buying a house.

How Do I Create a Budget?

Creating a budget (and sticking to it) is one of the best ways to grow your savings. Take a look at your outgoings to see how much you’re left with each month after all essentials bills, such as rent, council tax and utility bills, are taken care of.

How long it takes for you to save for a deposit will depend on how much you can afford to set aside each month, so be realistic about what you can afford.

A more expensive house will, of course, take longer to save for. If you are willing to work with a smaller budget for your first home, you’ll be able to get on the property ladder in less time.

As personal money-management expert Dave Ramsey says: If you will live like no one else, later you can live like no one else.”

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How Can I Boost My Savings?

The goal is to spend less than you make, so you can put away as many savings as possible. Now is a good time to look at your outgoings and see where you can make savings.

We all know that coffee shops are overpriced and that taking your own lunch to work is less expensive. But beyond latte’s and sandwiches, what can you do to cut costs?

  • Set up a standing order to yourself - Transferring a proportion of their income into a savings account each month. Make sure you do this the day after payday by standing order. If you simply wait and see what you have left at the end of the month, you’re unlikely to save very much.
  • Set automatic savings - There are a number of apps which can do this for you, such as Plum or Cleo. Some banks also offer it as an option, linking your current and savings account. Halifax’s Save the Change scheme is just one example of this. When you buy something with your Halifax debit card, they’ll round the amount to the nearest pound and transfer the difference into your savings account.
  • Cancel unused subscriptions and memberships - Ask yourself; Do you use that expensive gym membership? Do you been both Netflix and Amazon Prime? Cutting some of these out can save you some serious money in the long run
  • Cut out luxuries - Change the way you think about saving money. Don’t shop when you are bored or want to pass the time. This is an easy way to spend money you don’t have on things you don’t need.
  • Eat out less - Learn to cook and eat at home and you will save yourself a fortune. Save eating out or ordering in for a special occasion - not because you can’t be bothered rustling up something at home. After all, you want to make the most of that rent you’re paying.
  • Buy generic - name brands for almost any product will cost more than budget options. If you want to put away more savings, walk past the brand logos.
  • Sell your stuff - Look around, do you really use, need and want everything you have? There’s money to be made on sites such as eBay which can contribute to your savings goal - plus, it gives you the chance to declutter in time to move house!
  • Consider a Second Income - If possible, try to get a part-time or evening job to supplement your income. This is a great short-term solution to boost your savings.
  • Spend within your means - Don’t try to keep up with your friends’ spending.Their journey is not your journey. If you really want to save for a deposit, spend within your own means, not somebody else's.

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How Can I Save for a Property While Paying Rent?

One of the biggest issues with saving for a deposit is saving whilst renting. With rent costs at an all-time high, it can seem impossible to put away any amount of savings, especially in large cities like London.

According to Zoopla’s Rental Market Report, the cost of renting has hit a three-year high. The report found that the average cost of renting a property in the UK during the final quarter of 2019 was £886 per month, 27% more than renting prices a decade ago.

  • Flat Share - Renting alone can be very expensive, you’ll be paying the whole cost of the rent and bills on your own. Why not share the cost of rent plus the bills by living with other people, either with friends or via sites such as SpareRoom.
  • Relocate - If it works for your lifestyle and work commute, try renting in a cheaper area in your city. It’s not forever and could save you hundreds a month in rent and council tax.
  • Move Home - Many first-time buyers move back in with their parents while saving for a deposit. This works best if your parents won’t expect you to pay rent - and they live within commutable distance of your job.

What Sort of Savings Account Should I Use?

Although it may seem obvious to keep your savings in the bank, it is often confusing looking at the various types of accounts available. Here we’ve broken down three options for keeping your savings secure.

Lifetime ISA

The Lifetime ISA (LISA) is an Individual Savings Account which benefits from extra money from the government and can be used to buy your first home or to fund your retirement after the age of 60.

  • The Lifetime ISA is open to UK residents over 18 and under 40.
  • The government will add a 25% bonus to your savings, up to a maximum of £1,000 a year.
  • When you turn 50, you will no longer be able to pay into your Lifetime ISA nor earn the 25% bonus, however, your account will still stay open and your savings with still earn interest or investment returns.
  • You can contribute up to £4,000 every year, up until you turn 50.
  • You can hold cash or stocks and shares, or a combination of both, in a Lifetime ISA
  • The government will add a 25% bonus to your savings, up to a maximum of £1,000 a year

Using the Lifetime ISA to Buy Your First Home

You can use funds in your Lifetime ISA to buy your first home if:

  • The property costs £450,000 or less
  • You buy the property at least 12 months after you open the Lifetime ISA
  • You use a conveyancer when purchasing
  • You’re buying a property with a mortgage

Help to Buy ISA

The Help to Buy ISA closed to new accounts on 30 November 2019. For those who have a Help to Buy ISA currently open, savings are possible in this account until November 2029, and you have until December 1st 2030 to claim to government bonus.

With a Help to Buy: ISA, the government will boost your savings by 25%. For example, for every £200 saved, you will receive a government bonus of £50, with the maximum government bonus being £3,000.

  • You can contribute up to £200 each month to your Help to Buy
  • A Help to Buy ISA can be used on a property costing £250,000 or less - or £450,000 or less within London
  • Help to Buy ISAs can be used with any residential mortgage but not buy-to-let.

Remember that you will receive the bonus once the sale is completed and therefore cannot be directly used for the deposit. However, the bonus can be used to cover conveyancing fees, the cost of repair work or contribute towards furniture for your new home.

Other savings accounts

A Lifetime ISA is the best home for your deposit savings. However, you can also use:

  • A regular savings account
  • An instant access savings account

A regular savings account is likely to pay more interest but there will be a limit as to how much you can save each month and when you can make withdrawals. Instant access savings accounts have fewer rules but lower rates.

Whatever kind of savings account you choose, it’s a good idea to set up a standing order or direct debit.

You will be able to have a regular savings account in addition to a Lifetime ISA (or Help to Buy ISA if you opened one before November 30th 2019), which gives you more than one option when it comes to storing and growing your savings.

Shop around for savings accounts with the best interest rates and remember that it doesn’t necessarily have to be with where you currently bank. A high-interest rate on a savings account means your savings can grow faster, getting you closer to your goal of home ownership.

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Can I Use a Loan as a Deposit?

You are unlikely to be offered a mortgage if you try to use a loan for your mortgage deposit.

The deposit tells the mortgage lender that you are able to manage your finances and save responsibly, so taking out a loan for this payment will not make you a desirable candidate for a mortgage.

If you are struggling to save money, there are a variety of different government schemes designed to help first-time buyers get on the property ladder.

The most popular schemes are the Help to Buy scheme (not to be confused with the Help to Buy ISA) and the Shared Ownership Scheme (also known as Part-Buy).

Help to Buy: Equity Loan

The Help to Buy: Equity Loan is a shared equity scheme that is available for those looking to buy a new-build home.

Typically a deposit of just 5% is required and the government or developer lends the rest of the deposit - up to a further 20%. This loan is free for the first five years.

However, you’ll start paying interest after five years and you’ll need to repay the loan at some point too.

Help to Buy: Shared Ownership

The Help to Buy: Shared Ownership offers potential homeowners the chance to buy a share of a home (between 25% and 75% of the home’s value) and pay rent on the remaining share.

This is open to those whose household earns £80,000 a year or less outside London, or £90,000 a year or less in London. It is available for first-time buyers if someone used to own a home but can’t afford to move or an existing shared owner looking to move.

You’ll need to have enough savings to cover 5% of the share you’re buying. Depending on where you are in the UK will determine how and where you apply. In England, go to the Government website, Scottish applicants can visit the Scottish Government website, Irish applicants will need to use and for Wales, it will depend on your local housing association.

There are major differences between shared ownership and the shared equity loan and so it's important to research both thoroughly before deciding which Help to Buy scheme is more suitable for you.

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Financial Help From Family Members

Many first-time buyers receive financial help from their parents to buy a first home. There are several ways the so-called Bank of Mum and Dad can help. These include:

  • Gifting you cash for a deposit
  • Loaning you money for a deposit
  • Acting as a guarantor on the mortgage
  • Taking out a joint mortgage

You will need to declare any parental help when applying for a mortgage and with your conveyancing solicitor.


All data, research, facts, and figures have been taken from reputable sources and government data that was accurate at the time of writing. Any information featured in this guide should not be relied on or regarded as an authoritative statement of law. While we aim to ensure that all information is accurate, we make no representations about the suitability or reliability with respect to the website as well as any products, information, or services that are featured on the website. Mortgage criteria, policies, and interest rates change regularly and vary depending on the lender and type of mortgage you have. You should speak directly to your mortgage lender for clarification. It should be noted that your home may be repossessed if you cannot keep up with your mortgage payments.
Emma Lunn

Reviewed by Emma Lunn

Freelance Personal Finance Journalist,

Emma Lunn is an award-winning journalist who specialises in personal finance, consumer issues and property.