Saving for Your First Home (UK)

Buying your first home is one of life's biggest financial goals—and biggest challenges. With average UK house prices over £280,000, saving a deposit feels impossible for many. This guide breaks down exactly how to save for your first home, including all the government schemes and tax-advantaged accounts available to UK first-time buyers.

Chapter 1: Understanding House Deposit Requirements

Before you start saving, you need to know your target. Mortgage lenders typically require:

Minimum 5% deposit: Available but comes with higher interest rates and limited lender choices
10% deposit: Better rates, more lender options
15-20% deposit: Best rates and terms, but takes longer to save

Don't Forget Additional Costs

Beyond the deposit, budget for:

Stamp Duty: First-time buyers pay no stamp duty up to £425,000, then 5% on the portion up to £625,000
Solicitor/conveyancing fees: £1,000-2,000
Survey costs: £300-1,500 depending on type
Mortgage fees: Arrangement fees of £500-2,000
Moving costs: £500-2,000
Immediate home expenses: Furniture, repairs, appliances

Example Target

For a £250,000 home with 10% deposit:
Deposit: £25,000
Additional costs: ~£4,000
Moving buffer: ~£2,000
Total target: £31,000

Chapter 2: The Lifetime ISA (LISA)

The LISA is the most powerful savings tool for first-time buyers. Here's how it works:

Who's eligible: Ages 18-39 to open (can contribute until 50)
Annual limit: £4,000 per tax year
Government bonus: 25% on contributions (up to £1,000/year free money!)
Property limit: Can use for homes up to £450,000
First-time buyer only: You must never have owned property before

LISA Types

Cash LISA: Earns interest like a savings account. Lower risk, predictable returns.
Stocks & Shares LISA: Invested in the market. Higher potential returns but values can drop. Better for longer timeframes (5+ years).

LISA Warning

If you withdraw LISA funds for anything other than your first home or retirement (after 60), you'll pay a 25% penalty—which actually means you lose money, not just the bonus. Only put in money you're sure is for your home.

Maximizing Your LISA

Open one as early as possible—even with £1—to start the 12-month clock (you must hold a LISA for 12 months before using it for a home)
Contribute at the start of the tax year to maximize interest/growth
If you're a couple, both partners can have a LISA for double the bonus

Chapter 3: Help to Buy ISA (Closed to New Applicants)

Help to Buy ISAs closed to new applicants in November 2019, but if you have one, you can still use it:

Continue contributing until November 2029
Claim your bonus until November 2030
25% government bonus up to £3,000
Property limit: £250,000 (£450,000 in London)

LISA vs Help to Buy ISA

You can have both, but you can only use the government bonus from one for a property purchase. The LISA generally offers better terms (higher property limit, larger annual contributions, bonus paid into account rather than at completion).

Chapter 4: First Homes Scheme

The First Homes scheme offers new-build homes at 30-50% below market value:

Discount: At least 30% off market price (some areas offer more)
Price cap: £250,000 after discount (£420,000 in London)
Income cap: Household income under £80,000 (£90,000 in London)
Priority: Key workers and local residents often get first choice

The discount stays with the property forever—when you sell, you must sell to another eligible first-time buyer at the same percentage discount.

Chapter 5: Shared Ownership

Can't afford to buy 100% of a home? Shared Ownership lets you buy a share (25-75%) and pay rent on the rest:

Smaller deposit: 5-10% of your share only, not the whole property
Staircasing: Buy more shares over time as you can afford them
Who qualifies: First-time buyers and previous homeowners who can't afford to buy, household income under £80,000 (£90,000 in London)

Example

Property value: £200,000
You buy: 50% share = £100,000
Your deposit (10%): £10,000
Monthly mortgage: ~£400
Monthly rent on remaining 50%: ~£300
Total monthly cost: ~£700

Consider Carefully

Shared Ownership has pros and cons. You build equity and get on the ladder, but you pay both a mortgage AND rent, and selling can be complicated. Research thoroughly before committing.

Chapter 6: Mortgage Guarantee Scheme

The government backs 95% mortgages through participating lenders, making it easier to get a mortgage with just a 5% deposit:

Available on properties up to £600,000
Must be your primary residence
Not just for first-time buyers
Government guarantees part of the mortgage, so lenders are more willing to offer 95% LTV

Chapter 7: Creating Your Savings Plan

Now let's build a realistic plan to reach your deposit goal:

Step 1: Set Your Target

Research property prices in your target area. Be realistic—prices may rise while you're saving. Add 10% to current prices as a buffer.

Step 2: Choose Your Deposit Size

5% gets you on the ladder faster, but 10-15% gets better rates and more security. Calculate both options.

Step 3: Set a Timeline

When do you want to buy? 2 years? 5 years? This affects how aggressively you need to save and where to put your money.

Step 4: Calculate Monthly Savings Needed

Total target ÷ number of months = monthly savings required

Create Your House Savings Plan

Use iBudget to set a house deposit goal, track your progress, and see exactly when you'll reach your target.

Start Planning

Chapter 8: Maximizing Your Savings Rate

The more you save, the faster you'll get there. Strategies to boost your deposit fund:

Reduce Housing Costs Now

Live with parents if possible (offer to contribute)
House share to split rent
Rent a room and become a live-in landlord
Move to a cheaper area temporarily

Boost Income

Ask for a raise
Take on overtime or freelance work
Start a side business
Sell skills on platforms like Fiverr or Upwork

Cut Aggressively

No-spend challenges (no discretionary spending for a set period)
Cancel all non-essential subscriptions
Cook all meals at home
Find free entertainment and socializing options

The Partner Advantage

Buying with a partner dramatically speeds up saving. Two incomes, two LISAs (£8,000/year with £2,000 bonus), shared living costs. If you're in a committed relationship, buying together is worth discussing.

Chapter 9: Getting Mortgage-Ready

While saving, prepare yourself to be an attractive mortgage applicant:

Credit Score

Check your credit report (free via Experian, Equifax, or ClearScore)
Fix any errors
Register on the electoral roll
Don't apply for new credit in the 6 months before your mortgage application
Keep credit utilization low (under 30% of limits)

Employment History

Lenders like stability—avoid job hopping if possible
Complete any probation periods before applying
If self-employed, you'll typically need 2-3 years of accounts

Bank Statements

Lenders review 3-6 months of statements
Avoid overdrafts and returned payments
Reduce gambling transactions (red flag for lenders)
Show consistent saving behavior

Your First Home Action Plan

This week: Open a LISA (even with £1) if you're eligible and haven't already
This month: Research property prices in your target area and calculate your deposit goal
Ongoing: Maximize LISA contributions (£333/month = £4,000/year + £1,000 bonus)
3-6 months before buying: Get a mortgage in principle, check your credit
When ready: Start viewing, make offers, and celebrate when you get those keys!

More resources for first-time buyers:

Track Your House Fund

iBudget makes it easy to track your deposit savings, set milestones, and stay motivated on your journey to homeownership.

Start Saving for Your Home