How much money should you have before buying a house

Purchasing a home is a costly endeavour, and for most of us, it is the single largest financial transaction of our lives, devouring the majority of our life savings. We take a closer look at all of the expenses that could occur when purchasing your first home, as well as ways to stretch your budget.

The minimum savings you need to buy a house

We’ve put together some figures below to help you figure out how much money you’ll need to purchase your first home. However, keep in mind that these are just estimations,

To buy a cheap house, you’ll need between 5% of the property value plus any solicitors’ fees and disbursements. The solicitors’ fees will normally be around £1000 plus VAT, then disbursements which will come in around £800 (approx.).

Solicitors’ fees do vary so feel free to shop around and get some quotes. Also, you may be charged stamp duty, valuation fees, broker fees (in many cases but not all) and arrangement fees to the mortgage lender (sometimes these can be added to the mortgage, and they do vary from lender to lender and interest rate to interest rate. A typical fee would normally be around £999).

Want to know more?

For more details, call our Mortgage Saving Experts today.

Cheap (assuming the bare essentials and cheapest upfront deals)

Property value: £100,000

Help to Buy equity loan: £20,000 (20%)

Mortgage size: £75,000

Annual income needed: £18,750 minimum but how much you need to earn differs from lender to lender) it also depends on what debts you have.


5% deposit: £5,000

Mortgage arrangement fee: £999 (these is a typical fee and can normally be added to the loan)

Solicitors’ fees £1000 plus VAT

Legal Disbursements £750 (approx.)

Valuation fee £0 (sometimes free but charges can vary from £250 upwards – they are payable on application and non-refundable)

Stamp duty: £0

Buildings and contents Insurance: £250 a year (approx.)

Moving costs: £0 (assuming you move with your own, or friend or family’s car)

Total upfront cost: £6950 (The deposit does not have to be paid up front as it is payable normally around 2 months after you have agreed to purchase the property. This is called Exchange of contracts)

Typical (around the UK average)

Property value: £200,000

Help to buy equity loan: £40,000 (20%) – £80,000 (40% – only available in London boroughs)

Mortgage size: £150,000 (with 20% equity loan); £110,000 (with 40% equity loan)

Annual income needed: £37,500 this does vary from lender to lender; £27,500 (with 40% equity loan)


5% deposit: £10,000

Mortgage arrangement fee: £999

Solicitors’ fees £1000 + VAT

Legal disbursements £750 (approx.)

Valuation fees £0 (free with some lenders but not all)

Stamp duty: £0 (this will change after 1st September 2021 and after this date it will be £1500)

Insurance: £250 a year (approx.)

Moving costs: £0 if you use your own transport but can vary.

Total upfront cost: £11950 (assuming no stamp duty is payable)

Expensive (typical for London)

Property value: £500,000

Help to buy equity loan: £200,000 (40% – only available in London boroughs)

Mortgage size: £275,000 (with 40% equity loan)

Annual income needed: £68,750 (with 40% equity loan)

Want to know more?

Get in touch with of our mortgage saving experts today.

Things to consider before buying a house:

Average house prices

According to the Office for National Statistics, the average house price for a first-time buyer in the UK in 2020 will be £239,000. (ONS).

Of course, house prices vary significantly depending on location; for example, a standard home in London costs around £489,000, while a home in Newcastle costs around £132,000.

To make matters even more complicated, house prices are highly localised. Inexpensive regions, cheaper neighbourhoods (or even just cheaper streets) are popping up, and vice versa.

As a result, you’ll need to do some homework to figure out how much money you’ll need to set aside. If you search hard enough, you might be able to find a good deal in your perfect neighbourhood.

However, with land, the adage “you get what you pay for” can sometimes be valid, so think about these things before you buy a bargain:

  • Resale value – Will the price rise quickly, or will it fall? It’s impossible to say, but patterns can help you make an informed guess.
  • How long you think you’ll live there
  • Job prospects in the area
  • Transport links
  • Local schools
  • Crime rates
  • Flood risks

Can you get a mortgage?

A deposit of at least 5% of the value of the home you want to buy is normally needed. You can get a mortgage with no money down, but it’s a risky and unconventional approach.

While it is preferable to have a larger deposit than 5% small deposits are popular among first-time buyers.

Getting better mortgage deals

If you put down a bigger deposit, you’ll be able to get lower mortgage rates, which means lower monthly payments.

The lowest mortgage rates are usually available for people who put down at least a 40% deposit, although this is rare for first-time buyers.

Different loan to value (LTV – mortgage amount divided by house value) brackets (or tranches) are used to divide mortgage deals. In general, the lower the LTV, the lower the mortgage interest rate. In essence, mortgage offers fall into the following categories (listed in ascending price order) 60 % LTV, 65 % LTV, 70 % LTV, 75 % LTV, 80 % LTV, 85 % LTV, 90 % LTV, 95 % LTV, and 100 % LTV are the different percentages of LTV.

This means that if you’re on the verge of having a lower loan to value then it may be worth while trying to find the extra deposit to bring the Loan To Value down so your rate decreases. . If you have a 9% deposit, you can get better rates by saving a 10% deposit.

Related Links

How much you can borrow

This varies immensely from lender to lender and can be affected by what type of income you have ie mainly commission or benefits. It will also depend on what debts you have in the background for example if you earn £50,000 per year but pay £1000 for a car finance payment then you will not be able to borrow as much as you could if you did not have that loan. Generally, if you have a 25% deposit or more then you can get up to around 5 times your annual gross salary (your salary before tax is paid). In some circumstances you may be able to borrow more than that, but you will need to meet certain criteria for this.

Want to know more?

Get in touch with of our mortgage saving experts today.

What are my options with the Help to Buy scheme?

If you’re having trouble saving for a deposit, the government’s Help to Buy scheme might be able to assist you in certain ways.

The Help to Buy equity loan

With the Help to Buy Equity Loan scheme, you can get an interest-free equity loan from the government, which can help you go from a 5% deposit to a 25% deposit (45% in London,).

Notice that you can only use the equity loan to purchase a new-build property with a maximum valuation of £600,000 in London and this varies from which part of the UK you live in.

After five years, you’ll have to start paying a 1.75% in interest on the Equity loan Help to Buy have given you. The payments you make will only pay the interest on the equity Loan so you can make a plan to pay off the loan as soon as possible after you have bought the property.. You can always remortgage to raise enough money to repay the equity Loan therefore you will then own 100% of the property.

Since loan is secured on the property, the government would effectively own up to 40% of your home’s value in London and 20% anywhere else in the country. When you decide to pay back the loan, you must repay the equity percentage, not the original loan sum therefore if you bought in London and borrowed 40% then you will need to pay back 40% of the current property value. This is the same for people who have a 20% Equity loan.

So, if you took out a 20% equity loan to buy a £200,000 home, you would have borrowed £40,000. If the value of your home rises to £250,000 in five years, you’ll have to repay 20% of £250,000, or £50,000, which is £10,000 more than you borrowed.

Remember to factor this into your mortgage plans.

Help to Buy scheme 2021 to 2023

The Help to Buy programme will be phased out on March 31, 2021. However, beginning April 1, 2021, a new Help to Buy: Equity Loan scheme for first-time buyers will be available for two years. This scheme will be more regionalised, with price caps set for borrowing in different parts of the country.

Boost your savings with a Lifetime ISA and Help to Buy ISA

The government will pay you a bonus on your savings by 25% with a Lifetime ISA up to a maximum of £1000 per year or the (now closed) Help to Buy ISA, but there are a few main differences between the two savings schemes.

Lifetime ISA (LISA)

How much money would you put down? You can save up to £4,000 a year before you reach the age of 50.

What can you pay in?

Cash, as well as stocks and shares.

Who can get one? Anyone over the age of 18 and under the age of 40 who has never owned a home anywhere in the world.

What is the government bonus?

You will get a 25% bonus up to £1,000 per year if you put money into an ISA; the bonus is not affected by interest or increases in stocks and shares.

What can you use it for?

If you withdraw at any other time, you will forfeit the bonus and be charged a 25% fee.

Coronavirus LISA update

Because of the coronavirus pandemic, the government has lowered the 25% fee to 20% for withdrawals made between March 6 and April 5, 2021. This effectively ensures that you will get the sum you paid in plus interest to have a Cash Lifetime ISA. The sum you can withdraw from a Stocks and Shares Lifetime ISA is determined by how well your investments have performed.

What’s the biggest bonus you can get? If you deposit the limit of £4,000 per year between the ages of 18 and 50, you will earn a bonus of up to £33,000.

A £3,000 bonus would take at least three years to earn.

How soon can you use it? Before making a withdrawal, you must have had the Lifetime ISA for at least 12 months.

What’s the most expensive house you can buy? £600,000.

Couples can each take out a LISA and use it to purchase a home together. LISAs can be switched from one supplier to another.

LISA holders can also put money into a Cash ISA each year, but the £4,000 cap would be deducted from the annual ISA limit (currently £20,000).

Help to Buy ISA – now closed to new accounts

The Aid to Buy ISA was a government-sponsored savings programme designed to assist first-time homebuyers. Although the scheme was closed to new subscribers on November 30, 2019, those who had already opened a Help to Buy ISA can continue to save until November 2029.

Could shared ownership be the route for you?

You can purchase a portion of a home through a housing association by shared ownership. You can purchase a share worth between 25% to 75% of the total and then pay rent on the remaining share.

For example, if a house is worth £200,000, you might buy a £50,000 share and pay the local housing association rent on the remaining £150,000. You’d only need to apply for a £50,000 mortgage in this case.

The amount of rent charged varies by a housing association, but it is typically 2-5% of the housing association’s share value and is divided into monthly payments.

For example, 3% of £150,000 is £4,500, which is divided by 12 equals £375 each month, so you’d have to pay £375 each month in addition to your mortgage.

Previously, you had to meet local housing authority requirements to apply for Shared ownership. Still, starting in April 2016, the scheme was opened up to any household with an annual income of less than £80,000 (£90,000 in London).

Could a guarantor or family assisted mortgage help?

There are a few ways your family can assist you in obtaining a mortgage. The most noticeable is if they actually gift you the money for the loan, but this isn’t a choice for most people, and in some cases, it’s still not enough to get a mortgage.

A few specialised mortgages are available on the market that may be of assistance such as Joint Owner Sole proprietor.

Guarantor mortgage

Even with a deposit, first-time buyers can find it difficult to meet lending requirements because they are self-employed or have a low credit score. This is where a guarantor mortgage can benefit, as it basically allows you to borrow money based on the creditworthiness of both people.

A guarantor mortgage is one in which the guarantor (usually a near family member) agrees to pay the mortgage if the borrower fails to do so. The guarantor is bound to the contract.

Many guarantor loans need a deposit, but there are guarantor mortgages up to 100% available in which the guarantor uses their own home as protection. However, these are extremely dangerous since the guarantor can lose their home if the borrower and guarantor defaults.

The guarantor mortgage can be difficult to get because the lender may only lend to the older applicants age of 80 in some cases so if you are using your parents to go on the mortgage with you and they are 59 years of age then you can only take to mortgage over 20 years which in turn could make the monthly payment unaffordable for you.

There are plenty of options around for people with low deposit so speak with one of our advisers to find out your options.

Family assisted deposit

A family deposit mortgage will help you increase your deposit without requiring any physical money.

A family member may deposit into an account linked to the borrower’s mortgage, which is then applied to the mortgage. Borrowers are frequently required to put down at least 5% of the loan amount, but this varies by lender.

Once a certain amount of time has passed, or the debt has been paid off either in full or the loan to Value has reduced to a certain point, the family member may receive their money back in full, often with interest.

Ready to Get Started?

The team of experienced Mortgage Advisers at Mortgage Saving Experts have extensive knowledge of the property market. They can help you with every step of the buying process, from application to completion. To find out more, call us on 01273 738 072.


I’ve found a property I love. What do I do now?

Before making a bid, you need to get an Agreement in Principle from a mortgage lender and find a solicitor. For more details, simply contact us on 01273 738 072 to discuss your options with one of our mortgage brokers and we can get it all sorted and an AIP sorted that day if needed.

What Help to Buy Schemes are there?

Help to Buy equity Loan is a government-backed mortgage scheme that offers the chance to purchase a new home with as little as a 5% deposit. In England, there is a new Help to Buy Equity Loan (2021-2023) scheme for first-time buyers only, which launched in December 2020 and will run until March 2023.

How much will conveyancing cost?

Conveyancing may sound like dry legal jargon, but it refers to anything that must occur in order for the property to become legally yours. It’s a complicated procedure that requires the assistance of a solicitor. We will connect you with a solicitor and that will be able to assist you. To get an estimate of how much this would cost, contact us on 01273 738 072 today.

How much will stamp duty cost?

When you purchase a property in the United Kingdom for more than a certain amount, you must pay land tax. Buyers in England and Northern Ireland didn’t have to pay stamp duty on the first £125,000 and first-time buyers up to £300,000 until July 7, 2020. To help the economy through the COVID-19 crisis, the government declared a stamp duty holiday on July 8, 2020, increasing the threshold to £500,000. This transition ended on March 31, 2021. The Land and Buildings Transaction Tax Rate apply in Scotland. The first £145,000 is tax-free for buyers.  

Do I need a survey?

In order to obtain a mortgage, the mortgage lender will arrange for a mortgage valuation, which sometimes you will have to pay for. A mortgage valuation just guarantees to the lender that the property is worth the amount you’re being let, and it is suitable security for the mortgage and it does not necessarily reveal any information about the property’s condition. When you buy a house, we suggest that you get your own Homebuyers report or survey done. It helps you to see the property’s current state, reducing the risk of unpleasant surprises down the road. There are two different forms of surveys, each with different prices, and we will connect you with a surveyor when required. In Scotland, a survey will already be included in the Home Report, which you can access.

When do I need to pay the deposit?

The deposit is normally paid to your solicitor when the contracts are exchanged.

When do I need to arrange insurance?

If you are buying a house then you will need to start a buildings and contents insurance policy when you exchange contracts. We provide advice and use reputable Insurance companies for all of our insurances such as AVIVA, Legal and general and Zurich to name a few. We offer a range of competitive products from the whole of the market. To keep things easy, we’ll be in contact with you to discuss your needs. Remember that all applicable insurance plans must begin on the date of contract exchange. You should also think about getting mortgage insurance so that your family isn’t obligated to make your mortgage payments in the event of your death, contracting a critical illness or sickness. To keep things simple, we get the mortgage sorted for you first and then when your mortgage offer is given to you form the mortgage lender we can then chat about insurances. Easy!

Mortgage Lenders

Want to know more?

For more details, call our Mortgage Saving Experts today.

Want to know more?

Get in touch with of our mortgage saving experts today to find out how we can help.

Get in touch