Saving for a Mortgage Deposit: Making the Most of Your Rent to Buy Home

Are you hoping to get onto the property ladder, but feel you’re stuck and unable to save because of expensive private rents? That’s where Rent to Buy can help.  

Our Rent to Buy customers benefit from a reduced rent, typically around 80% of the local market rate. The idea is simple: by spending less on rent, you have a greater opportunity to put money aside each month and work towards homeownership. In this blog, we'll share practical ways to make the most of your rent savings and help you move closer to buying your own home.  

How much deposit do you need to buy a home?  

When saving for a mortgage deposit, it’s great to have a goal in mind for how much you’ll need to save. This being said, the question “how much deposit do you need to buy a home?”, is very much the same as “how long is a piece of string?” – it’s individual.  

To determine how much you need to save, you need to ask yourself a couple of key questions:  

Are you buying your home outright or on a Shared Ownership basis?  

If you’re buying your home outright, you’d need to typically have saved 5% or 10% of the full market value of the home. On a home that’s worth £250,000, a 10% deposit is £25,000 – plus you also will need to have saved for solicitor fees, mortgage broker fees and mortgage arrangement fees, as well as any moving costs.  

If you’re buying your home on a Shared Ownership basis, your mortgage deposit is a percentage of the share you’re buying – and these can range from as low as 10% shares, up to a 75% share in the home. For a 25% share of a home worth £250,000, a 10% deposit would be £6250 – so as you can see, it’s a vast difference between the two figures. 

What loan to value are you hoping to achieve?  

Loan to value refers to how much you’re putting down in comparison to how much is mortgaged on the property. Most people aim to have a 90% loan to value, so putting down a 10% deposit. Some mortgage lenders will allow you to put down a 5% deposit, which will lower the amount you need to save up initially; however, it would increase your monthly repayments. The best thing to do would be to speak with a qualified mortgage advisor to chat through your personal circumstances and what would be the most affordable option for you.

Choosing the right savings account for your mortgage deposit 

Having a separate account for your savings is one of the best things you can do to physically save money – by moving the money into another account each month, you’re less likely to dip into it accidentally.  

Some banks also offer separate savings pots as part of the same account, giving you the opportunity to label the savings pot, with each serving a different purpose. For example, you could have a pot for your home deposit and a pot for Birthday and Christmas gifts, making sure your money stays separate.  

When saving for a deposit, you can also look at savings accounts that have higher interest rates. These account often aren’t instant savers, so you’re unable to take your money out of the account for a certain time period, making it easier to keep saving towards your goal and the higher interest rate also means your saved money is earning you more money while it’s in that account.  

Lifetime ISAs 

Lifetime ISAs (LISAs) have replaced the old Help to Buy ISA formats, and they’re a great way for first time buyers to save their money. It’s a government-backed scheme that can give you a 25% boost on your savings, and it’s designed to help you buy a home.  

There are certain eligibility criteria to meet in order to open up a LISA, and if you decide not to use the money for a house deposit or towards retirement, you will be subject to a penalty charge, so it’s worth considering if this is the right option for you and your family. Many people saving for a home tend to use a combination of savings accounts and LISAs, meaning they still have access to some money should you need it in an emergency, for example if your car broke down, but can still also benefit from the 25% savings uplift. 

Saving for your house deposit effectively 

Saving for a mortgage deposit can feel daunting, but Rent to Buy gives you a valuable opportunity to build your savings while benefiting from reduced rent. Whether you're saving through a dedicated savings account, a Lifetime ISA, or a combination of both, the key is to start early, stay consistent, and make the most of the money you're saving each month. 

If you're an existing Rent to Buy customer and would like guidance on your homeownership options, our team is here to help. Contact us on 0345 601 9095 or email renttobuy@amplius.co.uk.