Many people would like to own their own home and fir most people the first step towards doing this is to get a mortgage. Getting a mortgage can be quite tricky and one part of most mortgages is to save up a deposit. This is a percentage of the amount that you want to borrow that has to be paid towards the value of the house. The amount this has to be is a percentage of the price you pay for the house and so it depends on how expensive the house is as to how much you have to pay.
How to calculate how much I need to save
Calculations are best to be started by working out how much the maximum is that you will be able to borrow. Lenders will often have a calculator on their website where you enter information such as your salary and it will show how high a mortgage they will be prepared to lend you. If there are two salaries then this will help as not only is there more income to be able to cope with the repayments, if one person loses their job there is still an income coming in. Single people can have mortgages though, but they will just not be able to borrow so much. Often the formula is 4.5 x joint salaries, but this will vary from lender to lender. If you have a particular lender in mind then you will need to use their calculator, otherwise look at a selection to get a general idea.
Once you have this figure you simply use the percentage that the lender wants you to pay as a deposit to calculate the actual amount you will need to save. This will vary between lenders again, so if you know which lender you are using this could help, but if you look at a selection of lenders you will get an idea of how much it will be.
Will it be enough?
Once you have calculated this figure you might be rather overwhelmed by the amount. It can be a large amount. For example, if you are earning £25,000 and have a partner earning £20,000 you will be able to borrow £202500 and if you need a 10% deposit that is £20,250. This can seem like a very large amount of money considering your salaries. However, saving this much may not even be enough.
It is wise to have extra money for a selection of reasons. Firstly, you will have other expenses when you buy a home such as the solicitor, removals and buying new things for the home and any decorating you need to do so it is wise to have some extra money to pay for this. You will also need to consider that while you are saving up the house prices may go up so if you have your eye on a home, you may need more money to pay for it. If your salaries do not go up, you will not be able to borrow more so you will have to pay it with your deposit.
It is also wise to put down as much deposit as you can afford. This is because you will have a smaller mortgage. You will be being charged for your mortgage for the whole time you have it and the lower it is the cheaper it will be for you. It is surprising how much difference putting a bit more money down can make. It might seem hard enough saving the minimum amount but sometimes it can be worth saving that bit harder or for that bit longer to make that difference.
If you have a bigger deposit it will make you look better to the lender as well. They will not see you as such a risk to lend to. Not only will that mean that they are more likely to accept your mortgage application but they may offer you a better rate. For those borrowers that have a worse credit record or a lower deposit they may not get the advertised rate but a higher one due to the being a riskier customer.
So, you really should try to save more than the minimum that is needed. Try not to be tempted to go for a dearer home because you have a bigger deposit but put more money against a cheaper house and then you have some extra money which you can either put towards the costs of buying a home or put down against the mortgage to make borrowing cheaper. It will be worth it so it is wise to start savings as early as you can and save as much as you can and then you will find that you will be in a great position to get the home you want and have money to pay towards all the costs of moving and maybe even pay a bigger deposit than necessary.