The amount of deposit you need to buy your first home will really depend on the value of the property you want to buy.
The amount of deposit you put down on a new home will determine the loan to value (LTV) of the mortgage you will need.
Take a purchase price of £300,000.
A 20% deposit would be £60,000.
The mortgage you would need to cover the remainder would be an 80% LTV mortgage.
In other words, the mortgage is 80% of the property’s value at the time of purchase.
The minimum deposit you will need is 5% but a mortgage with an LTV of 95% will attract the highest interest rates.
If you can save a deposit of 10% then that is likely to attract a better interest rate, therefore reducing your initial monthly repayments.
The interest rates will reduce, the lower the loan to value of the mortgage. That is, the more deposit you can put down the lower your repayments are likely to be.
It is never too early to start saving for your first home.
You could start a children’s savings account for your child.
For example, Metro Bank offers a 5 for 5 Club whereby if your child makes 5 savings deposits in separate months into their young savers account, Metro will deposit £5 until they are 15 years old.
Now it is no longer possible to start a new Help to Buy ISA for your new property purchase, you may want to consider a Lifetime ISA to start saving for your first home.
This is open to anyone from the age of 18 up to 40. You can save into this account up to the age of 50.
The maximum investment per year is £4,000 and the government will add a 25% bonus every year up to a maximum bonus of £1,000.
For more details, click the link below. Please note there may be penalties for withdrawal for reasons other than buying your first home.