How to save money for a house deposit

Did you know that the number of first-time homebuyers in the UK is on the rise? According to recent statistics, there were around 874,000 first-time buyers in the market between 2022 and 2023. This represents an increase of 22,000 compared to the previous year.¹

If you're saving up for your first home, you're in good company. Lots of people have been where you are now. They managed to make it happen, and so can you. All it takes is a little budgeting and planning.

In this article, we'll show you some of the best ways to save money for a house deposit. We'll go over everything from budgeting tips to government schemes that can get you some discounts on your home purchase.

We'll also show you how to put your money to work for you with Revolut Instant Access Savings (T&Cs apply). Not only will it help you earn interest on your balance, but it'll also give you powerful budgeting tools that'll help put the keys to your new home in your hand.

1. Open a dedicated savings account

First things first — open up a savings account specifically for your house deposit as soon as the idea of buying a home pops into your mind. At this point, you might not even know what kind of property you're aiming for or how much money you'll need, but being proactive makes all the difference.

Why? Because the money you put into a savings account may earn interest. The longer it's there, the more you'll earn. Interest earnings won't get you a mansion overlooking Hyde Park overnight, but they'll add up over time. If you want to give your budget a boost early on, get a head start on your savings.

Keeping your house fund separate from your everyday spending money will also make it easier to stay on track. If your savings are in a separate account, you're much less likely to dip into them when you're out shopping.

There are lots of savings accounts to choose from: individual savings accounts (ISAs), fixed-term deposit accounts, instant access savings accounts, high-yield savings accounts, and so on. The best one for you depends on your timeline and savings target, so do your research to find a good fit. Be sure to compare things like interest rates, fees, accessibility, and security to make an informed choice.

Revolut Instant Access Savings is one option to look into. You'll earn up to 5% AER² variable on your GBP balance, with interest paid daily and instant access to your funds. You're free to add money at your own pace and make withdrawals whenever you need to — without any fees, penalties, or minimum balances to watch out for (T&Cs apply).

You can manage your savings safely from your app, with biometric technology designed to ensure only you have access to your money. For extra security, you can turn on the Wealth Protection feature and require selfie verification before every withdrawal.

The money you deposit in your Instant Access Savings is placed with a partner bank and is protected by the Financial Services Compensation Scheme (FSCS). The FSCS provides protection on eligible deposits up to £85,000 per person, per bank.³

With Revolut, you'll also get access to in-app budgeting tools that'll help you track your progress and meet your goals. You can create expense categories, set limits for each one, and get insights into your spending trends without spreadsheets or number-crunching. Everything you need to set a budget and stick to it is in one app.

² The Annual Equivalent Rate (AER) shows the interest you can earn over 1 year. AER is compounded, so you’ll earn interest on interest already earned. Rates depend on your plan type, from up to 4% on our Standard plan to up to 5% on our Ultra plan. Paid plan subscription fees and T&Cs apply. Interest offered is subject to change and any interest earned is liable to the applicable taxes. T&Cs apply.

📚 New to savings accounts? Find out what AER means and how you can use it to calculate your interest earnings.

Fees and T&Cs apply.

2. Understand house deposit requirements

As you start saving money for a house deposit, it's important to understand what lenders expect and how much you'll need to save. Let's break things down and go over some of the essentials.

What is a house deposit?

A house deposit is a lump sum of money that you pay when you buy a property to secure your mortgage loan. It's the percentage of the property's purchase price that you pay upfront, and the mortgage covers the remaining amount.

How much do you need for a house deposit?

The deposit percentage can vary depending on the lender, your personal circumstances, and the property you're buying. Let's look at a few factors that can affect deposit requirements.

• First-time buyer vs current homeowner
  If you're a first-time buyer, you'll typically need to save at least 5% to 10% of the property's value. That said, a larger deposit can give you access to better mortgage rates and terms. If you already own a home, you may need a deposit of 10% to 20%. This depends on the equity you have in your current property and the value of the new one.
• Property type and value
  Some lenders may require a larger deposit for certain types of properties, such as new-build homes or flats. For more expensive homes, lenders may require a deposit of 25% or more to lower their risk.
• Credit history
  A good credit score can help you get a mortgage with a lower deposit, while a poor credit history may require a larger one.
• Loan-to-value ratio (LTV)
  The LTV ratio is the size of the mortgage compared to the value of the property. The higher the LTV ratio, the lower the required deposit may be.

3. Determine your target deposit amount

This is where a little bit of local market research comes in. The amount you'll need to save will depend largely on the going rate for the type of property you want to buy. Here are some tips that can help you get a general sense of current prices and estimate your deposit amount.

• Determine the kind of property you need.
  Are you looking for a house or a flat? How many bedrooms do you need? What characteristics are non-negotiable, and which ones would be nice to have? Do you prefer a quiet neighbourhood or the hustle and bustle of a big city? Answering these questions will help you narrow down your choices.
• Research property prices.
  Look at the current property market in the areas you’re interested in. Websites like Righmove or Zoopla can help give you an idea of the average price range.
• Calculate your deposit amount.
  Decide on the deposit percentage you're aiming for. In some cases, 5% may be enough, but a larger deposit can help you get better mortgage terms. If you're not sure, consider talking to a financial advisor. Once you decide on the percentage, calculate the amount based on your price range.

There you have it — that's your target deposit amount and your north star. Having this clear goal to work towards will keep you motivated.

4. Analyse your current financial situation

With so many payments automatically coming in and out of your current account, you might not even have a clear picture of your finances right now. Breaking down your income and expenses can help you create a realistic and actionable savings plan. Here's how to do that.

• Identify all your sources of income.
  This includes your salary, bonuses, freelance work, rental income, and any other regular earnings. Then add up everything you make in a month to get a clear picture of your total earnings. If you're buying with a partner or another family member, factor in their earnings, too.
• Track your monthly household expenses.
  Start by listing your fixed expenses, like rent payments, utility bills, insurance premiums, and loan repayments. Then list your variable and occasional expenses. These may include groceries, eating out, entertainment, clothes, holiday expenses, birthdays, and car repairs.
• Categorise your expenses.
  Once you have a clear idea of what you're spending each month, separate those expenses into two main categories: essential costs and non-essential costs. Then break those down into subcategories that make sense to you.
• Identify areas to cut back.
  Zoom in on your non-essential costs and see where you can reduce your spending without negatively impacting your quality of life. Maybe save restaurant meals for a monthly treat, cancel old subscriptions you don't use any more, or shop sales to reduce costs.
• Set spending limits.
  With a clearer view of where you can cut back, set targets for each category. This is where Revolut's budgeting tools come in handy. You can categorise your expenses in-app, determine limits for each one, and keep your spending in check with trackers that give you powerful insights.
• Explore sources of extra income.
  Can you increase the amount of money coming in? Maybe find a side hustle by freelancing, rent out a room in your home, or sell items you don't need.
• Take advantage of perks like spare change round ups.
  If you're using Revolut, turn this feature on in-app to save a bit more. Whenever you make card payments, your purchases will be rounded up, and the difference will be sent to your savings account. Those pennies add up, and so does interest.

5. Create a savings plan

After breaking down your current budget and making adjustments, you'll have the info you need to create a solid savings plan. Let's look a few steps you can take to map out a savings strategy you'll actually stick to.

• Set a realistic timeline.
  How long do you expect it'll take to reach your goal? This could be a few months or years, depending on your current finances and the size of your target deposit.
• Break down your goal.
  Divide your target deposit amount by the number of months in your timeline to determine how much you need to save each month.
• See if your savings goal fits into your budget.
  After finding ways to maximise your income and minimise your spending, have a look at your revised budget. Subtract your expected monthly expenses from your monthly earnings. From that amount, can you comfortably send your target amount to your savings account?
• Make adjustments if necessary.
  If the numbers don't quite work out, that's okay — trust the process and see where you can make tweaks. Perhaps you can extend your timeline or reduce expenses even further.
• Set a monthly target and automate your savings.
  Once you decide how much you can save each month, set up automatic transfers from your current account to your savings. This will keep you consistent. With Revolut Instant Access Savings, you can schedule recurring transfers right in-app and time them to perfection. Set them up daily, weekly, or monthly, and change the amount whenever you need to. It's a great way to save without even thinking about it.

Fees and T&Cs apply.

6. Look into government schemes

The UK government offers several schemes designed to help people save for a house deposit. These initiatives can give your budget a boost and make homeownership more accessible. Here’s an overview of the main government schemes available.

Lifetime ISA (LISA)³

The Lifetime ISA is a savings account that offers a government bonus for first-time homebuyers. You generally need to be between 18 and 39 years old to open a LISA, and you can save up to £4,000 per year until you're 50.

The government adds a 25% bonus to your savings, up to a maximum of £1,000 per year. You can use the bonus to buy your first home, as long as the property costs £450,000 or less and you're buying with a mortgage.

You also need to wait at least 12 months after you make your first payment into your LISA to buy the property, and you need a conveyancer or solicitor to act for you in the purchase.

Each LISA provider may have additional requirements to open an account with them.

Shared Ownership⁴

Shared Ownership is a scheme that allows you to buy a share of a property (typically between 25% and 75%) and pay rent on the remaining share. You only need a deposit for the share you’re buying, which can be as low as 5%.

Shared Ownership properties are typically new-build homes or resale properties from housing associations. Over time, you can increase your share through a process called staircasing.

To be eligible, you need to be a first-time buyer or a previous homeowner who can’t afford the deposit and mortgage payments for a home that meets your needs. Your household income also needs to be £80,000 a year or less (up to £90,000 if you're in London).

There may be additional requirements and eligibility criteria can change, so make sure to do your research.

First Homes Scheme⁵

The First Homes Scheme is a relatively new initiative launched in 2021. It's aimed at helping first-time buyers purchase a home at a discounted price, typically 30% to 50% off the market price of the property.

To be eligible, you need to be 18 years or older and a first-time buyer. You're also required to get a mortgage for at least half the price of the home you're purchasing. Plus, your income generally needs to be lower than £80,000 a year before tax (up to £90,000 if the property's in London).

You can use the discount to buy a new home built by a developer, or a pre-owned home that the previous owner bought through the scheme. First Homes is only available in England at the moment.

You may be required to meet additional criteria, so check with the provider to find out if you're eligible.

7. Track and celebrate your progress

To save up for a house deposit, you need to be in it for the long game. That's why it's important to stay on top of your savings and keep yourself motivated.

If you're using Revolut, use your in-app analytics tools to watch your balance grow, day after day. See how your interest earnings and spare change round ups gradually add up, along with the amount you're setting aside regularly.

When you reach a significant milestone, celebrate your achievement. This could be as simple as treating yourself to a nice meal or a new book you've been wanting to buy. Even the smallest rewards can help keep you moving towards your goal.

Also, consider sharing your savings journey with friends or family. Their support and encouragement can be incredibly valuable. You might even find that others are on a similar journey, and you can motivate each other.

Save for your house deposit with Revolut

Ready to save up for your new home? The sooner you start, the sooner you'll reach your savings goal — and Revolut Instant Access Savings can help you get the most out of your money.

You can grow your savings on auto, make one-off transfers, and even save while you spend with spare change round ups on your purchases — all while racking up interest daily. You'll also get in-app analytics tools that'll help you track your progress and meet your goal.

Create a safe space to keep your savings and watch them grow — every single day leading up to your home purchase.

Fees and T&Cs apply.

📚 Saving up for something else? Check out our guides and explore some little-known money-saving tips.

How to save money for a wedding
How to save money for a holiday
How to save money for a car
How to save money for Christmas
How to build an emergency fund
How to save money in 7 simple steps

¹ According to UK first-time buyer statistics 2024
² The Annual Equivalent Rate (AER) shows the interest you can earn over 1 year. AER is compounded, so you’ll earn interest on interest already earned. Rates depend on your plan type, from up to 4% on our Standard plan to up to 5% on our Ultra plan. Paid plan subscription fees and T&Cs apply. Interest offered is subject to change and any interest earned is liable to the applicable taxes. T&Cs apply.
³ Check out the Financial Services Compensation Scheme (FSCS) website for more information.
⁴ Lifetime ISA
⁵ Shared Ownership
⁶ First Homes

Sources last checked on 31 October 2024.