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Blog How Much Of A Home Deposit Do You Need In 2024?

20 May 2024

How much deposit do you need for a mortgage?

How Much Of A Home Deposit Do You Need In 2024?

In the UK, first time home deposits have skyrocketed with the rising costs of housing to an eye-watering £108,000! It’s no surprise that countless young couples are trapped in a suffocating cycle of renting or are unable to afford to leave their parents’ homes.

When considering the purchase of your first home, it is crucial to understand mortgage deposits, including the amount you need to save.

Mortgages are typically available at up to 95% loan-to-value (LTV), allowing you to enter the property market with a deposit of 5% of the purchase price, while a mortgage covers the remaining 95%.

For example, the required deposit for a property valued at £250,000, would be a 5% deposit of £12,500 or a 10% deposit of £25,000. However the average first-time buyer deposit based on data from Halifax in January 2024 shows that the average deposit is as much as 22%!

The illustration above depicts the average size of a first-time buyer deposit in each region of the UK, based on data released by Halifax in January 2024.

From Gareth Ship – COO of HomeNow
“Recent data shows how significant the growth has been across the UK in the average deposit required from first time buyers. With the UK housing supply falling short year on year and a lack of innovative funding solutions available to aspirational homeowners, it is likely that this trend continues in the short to medium term, pricing many out of home ownership.”

How much will you need to save?

Property prices across the UK
The illustration above also displays the average house price in each region of the UK. However, you can also obtain a rough estimate of house prices in your desired area through property portals like Rightmove and Zoopla, or by consulting with local estate agents.

It’s important to note that the figures listed on property portals and agent websites represent asking prices, which often exceed the actual market value of the properties.

For more precise information, consider checking the sale prices of homes in the area using the Land Registry’s price paid tool.

How much you can afford in repayments?

With each monthly mortgage repayment, you’ll need to cover both interest and a portion of the loan (the principal). Opting for a larger deposit will shrink your loan size, leading to lower interest payments over time.

Aside from the interest rate, it’s essential to factor in other costs like mortgage fees, early repayment charges, and your preferred mortgage term. If the repayments for a low-deposit mortgage strain your budget, you might consider increasing your deposit size or investigating alternatives like guarantor mortgages.

Options if you’re struggling to save

Help, is at hand if you’re struggling to save up a big enough deposit for your first home, with several schemes aimed at supporting those trying to get on the property ladder:

Rent-To-Buy: Schemes such as HomeNow’s innovative rent-to-buy offer, gives aspiring homeowners who may struggle to save a traditional mortgage a chance to get on the property ladder. Under these arrangements, tenants rent a property with the option to purchase it after a specified period. A portion of the rent paid may be set aside towards a future deposit, allowing tenants to build equity while living in their prospective home.

Lifetime ISA: A Lifetime ISA or LISA is a tax-free savings or investment account created to assist individuals aged 18-39 at the time of opening in saving for their first home or retirement. The account offers a 25% government bonus, with the potential to receive up to £1,000 annually if you save the maximum amount of £4,000 per year. The maximum allowed purchase price for a house is £450,000.

Right to Buy: The Right-to-Buy scheme provides council tenants with the opportunity to purchase their home at a discount of up to 70% off the purchase price, with a maximum discount of £116,200 in London and £87,200 in other parts of England. Eligibility requires a minimum of three years of residency in a council house or flat in England.

Shared ownership: Shared ownership allows you to purchase a share of a property (typically starting at 25%) from a housing association and then pay rent on the remaining portion. This helps individuals to get on the property ladder, but it is essential to calculate the affordability of total costs, including mortgage, rent, and service charges before using this scheme.

Can you get a mortgage without a deposit?

Yes, with HomeNow you can move into your dream home without paying the hefty deposit. You’ll only need a standard security deposit and then you can enjoy the peace of mind of s fixed monthly rent.

How HomeNow can help

Are you struggling to save for a hefty deposit but dreaming of owning your own home? HomeNow’s rent-to-buy scheme offers a lifeline to aspiring homeowners like you.

Here’s how it works: first, choose your ideal home. Then, we handle the purchasing process, allowing you to move into your new home stress-free, and we will arrange a fixed monthly rent for 5 years.

But the benefits don’t stop there – with HomeNow, you have the opportunity to share in the property’s price increase. When your lease is up, you can choose to buy the house from us and officially become a homeowner using your share of the price increase, or move on to new adventures.

With HomeNow, owning your dream home has never been more achievable. Take the first step towards homeownership today!

Apply Now.