How Much Do You Need to Save for a Mortgage?
As a first-time buyer, the thought of saving for a mortgage deposit can be daunting. But how much do you really need to save? The experts at Which? have provided some guidance on how much you’ll need for a deposit.
Mortgages are typically available at up to 95% loan-to-value (LTV), meaning you could potentially step onto the property ladder with a deposit of just 5% of the purchase price, while a mortgage would cover the remaining 95%. But what does this mean in real terms?
Saving for a mortgage deposit can be a long and difficult process
Let’s take a look at an example. If you’re looking to buy a £200,000 property, here’s a breakdown of how much cash you’d need to put down based on different deposit sizes:
| Deposit Size | Amount Needed |
|---|---|
| 5% | £10,000 |
| 10% | £20,000 |
| 15% | £30,000 |
| 20% | £40,000 |
As you can see, the amount you need to save can vary greatly depending on the size of your deposit.
“The key to saving for a mortgage deposit is to start early and be consistent.” - Me
To figure out how much you might need to save for your mortgage deposit, consider typical property prices and monthly repayment costs. It’s also worth looking at property prices in your local area - you can get a rough idea from property portals like Rightmove and Zoopla, or by chatting to local estate agents.
Property prices can vary greatly depending on the location
Keep in mind, though, that the figures listed on portals and agent websites are asking prices, so they might be slightly higher than what the properties are actually worth. For more accurate information, you can check how much homes in the area have sold for using the Land Registry’s price paid tool.
Every monthly mortgage payment will comprise of interest as well as a portion of the loan itself - and the larger the deposit, the smaller the loan and the less interest you’ll have to pay. You should also consider aspects such as mortgage fees, early repayment charges, and the duration over which you want to repay the loan (the mortgage term).
To calculate how much a mortgage could set you back each month, you can utilise the Which? mortgage repayment calculator.
The Which? mortgage repayment calculator can help you plan your finances
In conclusion, saving for a mortgage deposit requires careful planning and discipline. By understanding how much you need to save and considering all the factors involved, you can take the first step towards owning your dream home.
Owning your dream home is within reach
