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In 2018 the amount of deposit needed for a mortgage for the average UK house is £11,304. This is calculated from a 5% deposit (the lowest available) on the average UK house price as of January 2018 (£226,071 - UK House Price Index).
This 5% is of course the lowest amount you'll likely have to save, with deposits generally ranging from 5% to 20% of the house price. Because of this, there'll be no exact set amount that a prospective homeowner will need to save before they can get a mortgage. First time buyers for example may generally save up a deposit of 20% of the property price, though there are mortgage available with smaller deposits.
But there's no need to be confused or daunted: here Compare My Move go through all you need to know about house deposits, including advice for first time buyers and guidance on costs.
As we mentioned in the introduction, home buyers will typically need to save a deposit of between 5% and 20% of the price of the house. For this reason, there's no specific set amount that a prospective homeowner has to save before they can get a mortgage.
Although there are mortgages available with 5% deposits, the deals you may be offered might be limited. This is because mortgage lenders view home buyers with smaller deposits as a riskier choice than those who provide a higher deposit. Generally, a small deposit may put you at risk from being declined by your mortgage providers.
So for a sure way of getting a good deal on your mortgage, you should aim for saving at least a 10% deposit on your house price. This means you would have to save a deposit of £22,607 to meet 10% of the current 2018 average house price (£226,071).
The deposit is one of the most daunting prospects for the first time buyer. To many, this lump sum is what stands in-between many first time buyers and a lifetime of renting. But the best way to overcome this is to be fully informed, and we're here to help.
Generally, first time buyers will be looking to save up between 5% and 20% deposit on the price of their first house. To put that in clear terms, a 10% deposit in 2018 would cost first time buyers on average £19,138. That's 10% of the latest average house price for first time buyers released in 2018.
Difficult to imagine being able to afford this? Well, in addition to long-term savings, there is the option of the Help to Buy Scheme outlined in the next section.
The help to buy scheme was set in place to help first time buyers with small deposits get on the property ladder. Prospective homebuyers with a deposit between 5% and 20% are able to buy a property through special loans or using the interest-free Help to Buy equity loan.
The scheme varies across the UK, but in England and Wales first time buyers can borrow up to 20% on the property price, available for new-builds up to £600,000 in England and homes up to £300,000 in Wales. In London the Help to Buy loan can cover up to 40% of the overall house price. In Scotland, buyers can borrow a maximum of 15% of the house price for homes up to £230,000.
Whether the scheme will leave you better off than regular mortgages depends largely on your individual circumstances. The loans are interest-free for a number of years, and will also help you access more favourable mortgages with a higher initial deposit. A mortgage adviser is a good starting point to talk to regarding the scheme and will be able to point you in the best direction.
Mortgage brokers can help you find the best deals available based on your deposit and situation. They are experts in the field and usually offer excellent advice and guidance to protect your credit score and get you on the property ladder.
Mortgage advisers are qualified professionals who have to justify any advice they give you – they have to recommend a suitable mortgage to you and be able to reason why it is the best package for you. A mortgage adviser will typically charge a fee of £500 for their advice, or receive a commission from mortgage providers.
Saving for a deposit can be difficult, especially if money is tight for you. The best way to start saving is to create a separate savings account to your current account and work out a monthly amount you would be able to realistically save away. Creating an automatic payment into your saving account each month means you won’t have to worry about a thing – the money you are saving away will automatically be stored away to build up a healthy deposit.
To get this money together takes some long-term saving from first time buyers, but luckily we've gone through the best saving options for first time buyers in our Lifetime ISA vs the Help to Buy ISA article. Both of these Government-run schemes offer a boost to savings from the UK Government when the amount is used to purchase your first house.
To get the best deals on the market, you may want to consider saving at least a 25% deposit, although some of the best deals require 30% or even 40% deposits.
This may be unrealistic for some first time buyers, so it is also worth considering shared ownership and shared equity schemes. Other alternative ways to buy a home include purchasing with friends or family, or getting a family offset mortgage.
For any house buyer, especially first time buyers, the prospect of saving up for a deposit quickly becomes the most daunting thing about planning your house purchase. But with all this talk about deposits and mortgages, may forget that there are a range of extra costs involved in both buying and selling a house.
From stamp duty to solicitors and estate agent fees, these extra costs can creep up. In fact, we recently calculated that in 2017, the average UK first time buyer was spending an extra £1,561 on top of the deposit to move into their new house. Existing home buyers in the UK were spending a huge £7,765 in extra costs in 2017 too!
Luckily, we've developed a free Cost of Moving House Calculator so you can stay on top of those extra costs ahead of your moving day.