Collaborative post
Saving a deposit is hard enough on your own. Add nursery fees, a car seat that needs replacing and a rent that goes up every year, and it can feel impossible. These are the approaches we see working for young families we help buy their first home, and a few that sound good but rarely do.
Quick answer: how do families save a house deposit?
The families who get there usually pick a realistic target, automate saving on payday, use a Lifetime ISA for the 25% bonus, claim every childcare support they qualify for, and get mortgage advice early so they know what deposit they actually need. Many buy with 5% or 10% down.
How big a deposit do you really need?
Less than a lot of parents assume. Plenty of lenders offer mortgages to first-time buyers with a 5% deposit, and a 10% deposit opens up more choice and usually better rates. On a £250,000 home, that is £12,500 or £25,000, plus money for legal fees, a survey and moving.
Finding out your real target early changes everything. A vague goal of “a big deposit” can drag on for years. A specific number, worked out with someone who knows what lenders will offer on your income, gives you something to aim at and a date to aim for.
What saving habits actually work for parents?
The families who save steadily almost always take the money out on payday, before it has a chance to be spent. A standing order into a separate account the day your wages land works far better than saving whatever is left at the end of the month, because with children there is never anything left.
The second thing that works is tracking the small, repeating costs. Subscriptions, phone contracts and insurance renewals creep up quietly. Going through a few months of bank statements once, and cancelling or switching what you can, often frees up more each month than any one big sacrifice.
The third is being honest about what you won’t give up. A budget that cuts out every treat tends to collapse by March. Keeping a small amount for days out, and saving hard everywhere else, is easier to stick to.
Is a Lifetime ISA worth it for a first home?
For a lot of families, yes. You can pay in up to £4,000 a year and the government adds 25%, so up to £1,000 a year in bonus. Each parent can have one, so a couple can earn up to £2,000 a year between them. The home must cost £450,000 or less, the account must have been open at least 12 months before you use it to buy, and there is a penalty if you withdraw for anything else. GOV.UK’s Lifetime ISA page has the full rules.
Are you claiming all the childcare help you can?
Childcare is often the biggest cost a young family has, so check you are getting every bit of support. Working parents may qualify for funded hours and for Tax-Free Childcare, where the government adds £2 for every £8 you pay in, up to £2,000 a year per child. GOV.UK’s Tax-Free Childcare page explains who can apply. Money you don’t spend on nursery can go straight into the deposit pot.
Can family help with the deposit?
Gifted deposits are common and a lot of lenders accept them. The person giving the money will usually need to sign a letter confirming it is a gift and they won’t own any share of the home. If grandparents want to help but can’t give a lump sum, some lenders offer schemes where a family member’s savings or income support your mortgage instead.
What do lenders think about childcare costs?
They take them into account. When a lender works out how much you can borrow, it looks at your regular outgoings, and nursery fees are one of the biggest. That can reduce the loan amount, which is another reason to get advice before you start viewing. If childcare costs are about to drop, because a child is starting school or funded hours are kicking in, a broker can explain how different lenders treat that.
Where should you start?
Pick a target, set up the standing order, open the Lifetime ISA and get a conversation booked with a mortgage adviser. A Little Mortgage Advice helps first-time buyers work out what they can borrow and what deposit they need at https://www.alittlemortgageadvice.co.uk/first-time-buyer-mortgages/, and no question is too small to ask.
Your home may be repossessed if you do not keep up repayments on your mortgage.
A Little Mortgage Advice is a mortgage broker based in South Benfleet, Essex, helping first-time buyers and people with a poor credit history. A Little Mortgage Advice (FCA reference 1006474) is an appointed representative of The Right Mortgage Limited, which is authorised and regulated by the Financial Conduct Authority.