How can I save for a mortgage deposit?
While saving for a deposit can seem daunting, there are lots of ways to do so:
1. Savings account - If you’re happy to lock your money away for a set period, then consider a fixed rate bond (or term account). The longer you’re willing to set your money aside, then generally the higher rate of interest you’ll get, but check out the terms and conditions for any minimum or maximum deposits.
And be aware that should the base rate of interest go up, meaning the interest rate on savings accounts also tends to go up, you won’t be able to move your funds to another account to take advantage of this.
If you’d rather not commit to setting money aside for a set period and you rely on your savings for emergencies, then opt for an instant access savings account instead. While the interest rates won’t be as good as a fixed term account, any minimum deposits are likely to be a lot lower (often just £1) and you can access your funds when you need to.
2. Current account - Most of us use our current accounts for day-to-day expenses, and there’s nothing to say you can’t use this as your main method of saving, especially as some banks pay interest on balances in a current account at a higher rate than some savings accounts.
3. Help to buy ISA -Available to first-time buyers only, for every £200 you deposit, the government will pay a £50 tax-free ‘bonus’ to go towards the property you want to buy.
You can deposit £1,200 during the first month, then up to £200 a month after that. The maximum bonus you can get from the government is £3,000, and the minimum you need to save to qualify for a bonus is £1,600 (generating a bonus of £400).
You’ll get the government bonus when you buy a property; if you decide not to buy one, then you won’t get the extra money. The bonus part of a help to buy ISA is paid per person, so if you’re planning on buying a home with someone else and you’re both first-time buyers, you’ll get double the money. You can open a help to buy ISA until 30 November 2019 and you must claim your bonus by 1 December 2030.