How to get on the Housing Ladder: Our Guide for First Time Buyers

Buying your first home is an exciting yet daunting prospect, especially as a first-time buyer navigating the myriad of processes involved. One of the most significant steps in this journey is saving for a deposit. The deposit is the initial sum of money you will need to provide as part of the payment for your new home, and it can often represent a hefty percentage of the property’s value. Here, in our blog How to get on the Housing Ladder: Our Guide for First Time Buyers, we explore various methods to save money for a deposit to help you get onto the property ladder.

Understand the Deposit Requirements

Before diving into specific saving strategies, it is essential to understand what is typically required for a house deposit in the UK. A standard deposit can range from 5% to 20% of the property’s purchase price, with a 5% deposit currently being the minimum requirement for most lenders. For example, on a £250,000 home, you might need a deposit of anywhere between £12,500 and £50,000. Knowing your target amount will provide clarity and motivate you to reach your savings goals.

Create a Budget

The first step towards saving is to create a detailed budget. A budget allows you to track your income and expenditure, helping you identify areas where you can cut back on unnecessary spending. Start by listing out all your sources of income, then itemise your monthly expenses such as rent, utilities, groceries and discretionary spending. By knowing how much you can realistically set aside each month, you’ll be better equipped to develop a feasible savings plan.

Here are just some if the options open to you when looking to save for that elusive deposit.

Open a High-Interest Savings Account

Once you have a clear budget, it may be wise to open a high-interest savings account specifically for your deposit fund. Regular savings accounts often offer minimal interest rates, which can slow the growth of your deposit. However, a high-interest account can yield better returns over time. Research and compare different banks and financial institutions to find one that offers competitive interest rates with no hidden fees. The earlier you start saving in this account, the more potential interest you can earn.

Set Up a Regular Savings Plan

Incorporate a regular savings plan into your budget. This could be daily, weekly or monthly contributions directed towards your deposit fund. Many banks allow you to set up standing orders that automate this process, making it easier to save without needing to remember to deposit money manually. Treat your savings plan like a fixed expense, prioritising it in your budgeting. Make sure that you stick to it. It’s often too easy not to!

Consider Shared Ownership

A shared ownership property is a type of housing scheme designed to help individuals, particularly first-time buyers and those who may struggle to afford a home outright, to get onto the property ladder. This arrangement allows buyers to purchase a share of a property, usually between 25% and 75% of its market value, while paying rent on the remaining share to a housing association or developer.

Here are some key features and benefits of shared ownership properties:

1. Affordability

Shared ownership makes homeownership more accessible by lowering the initial financial barrier. Buyers can mortgage only the share they own, making monthly payments more manageable.

2. Rent and Service Charges

In addition to the mortgage on their share, buyers pay rent on the portion of the property that they do not own. They may also be responsible for service charges, which cover maintenance and management costs associated with the property.

3. Staircasing

One of the attractive features of shared ownership is the option to increase your ownership stake in the property over time, known as “staircasing.” Buyers can purchase additional shares when they can afford to do so, eventually leading to full ownership.

4. Eligibility

Shared ownership schemes often have eligibility criteria that applicants must meet, such as income limits and being a first-time buyer, or not having owned a home in the past. Further information can be found in our blog here.

5. New Builds and Existing Properties

Shared ownership properties can come from new builds, as well as existing homes that have been made available for shared ownership. This offers potential homeowners a range of choices depending on their needs and preferences.

6. Restrictions and Regulations

There may be certain restrictions surrounding shared ownership properties, such as having to live in the property as your primary residence and potential limitations on renting out or selling your share in the future.

Shared ownership properties offer a practical solution for individuals who desire to own a home but find traditional mortgage options unattainable. By allowing buyers to start with a manageable stake in a property, it eases the transition to full homeownership while also providing an investment in real estate. Understanding the terms and conditions of shared ownership can help prospective buyers make informed decisions about their housing options.

Consider Government Schemes

The UK government offered two schemes to assist first time buyers. The first, the Help to Buy ISA, has sadly been withdrawn but there is still the option of a Lifetime ISA. A Lifetime ISA (Individual Savings Account) is a type of savings account designed to help individuals save for their first home (or for retirement). Here are some key features:

1. Tax Benefits: Money saved in a Lifetime ISA is tax-free, meaning you won’t pay income tax or capital gains tax on any money you earn from it.

2. Government Bonus: For every £4 you save, the government adds a £1 bonus, up to a maximum of £1,000 per year.

3. Eligibility: You can open a Lifetime ISA if you’re aged between 18 and 39, and you can continue to save into it until you turn 50.

4. Withdrawal Rules: You can withdraw money from your Lifetime ISA to buy your first home (worth up to £450,000) or when you turn 60. If you withdraw money for other reasons, you may have to pay a 25% penalty on the amount withdrawn.

To obtain a Lifetime ISA, you can visit banks, building societies or online providers that offer them. You will need to provide personal information and may need to make an initial deposit.

Cut Down on Unnecessary Expenses

Review your monthly expenses for discretionary items that can be reduced or eliminated. Consider dining out less frequently, cancelling subscription services you rarely use or becoming more frugal with clothing and entertainment. Every little penny saved can contribute significantly to your deposit. Create a challenge for yourself to find areas to save money each month and track your progress to stay motivated.

Take on a Side Hustle

If you have the time and energy, consider taking on a side hustle. This could involve freelance work, tutoring, pet sitting or any other activity that can generate extra income. All additional funds earned from this side hustle can go directly into your deposit savings account. Not only does this strategy help you save faster, but it can also provide a sense of accomplishment and boost your skills along the way.

Make Use of Windfalls

Throughout your life, you may receive windfalls such as bonuses, tax refunds or gifts. Rather than spending these unexpected amounts, consider depositing the entire sum into your home savings account. This single act can significantly boost your deposit fund and shorten your time frame for achieving your goal.

Get Family Support

Many first-time buyers consider whether they can receive assistance from family members for their deposits, typically referred to as the bank of mum and dad. This could come in the form of a monetary gift or a loan that helps you reach your deposit target sooner. Some schemes allow family members to act as guarantors on loans or opt to buy the property with you therefore potentially increasing the sum that you can borrow. Be open and honest with your family about your goals and see if they can offer support.

Monitor and Adjust Your Savings Strategy

As you progress towards saving for your deposit, review your budget periodically to ensure that your savings strategy remains effective. Life circumstances may change—such as a new job, relocation or an increase in living expenses—which could call for adjustments in your savings plan. Regularly monitoring your finances will not only keep you on track but also provide insights into your financial habits and savings progress.

Conclusion

Saving for a deposit as a first-time buyer can seem like a monumental task, but with dedication, planning and strategic actions, it is entirely achievable. By creating a budget, employing smart savings strategies and exploring available assistance schemes, you can make significant strides towards securing your first home. Remember, every small saving counts and will bring you one step closer to being a homeowner. Stay motivated, stick to your plan, and embrace the exciting journey ahead of you in property ownership.

As with any investment decision, when buying a property it’s vital that you do your homework carefully. Speak to us and to financial advisors to determine the eBay routes available to you.

If you are looking for a first rate conveyancing service why not give one of Alexander JLO’s specialist property lawyers a call on 020 7537 7000, click on the get a quote button or email quote@london-law.co.uk for a free, no-obligation quotation? Come and see what we can do for you.

This blog was prepared by Alexander JLO’s property partner Matt Johnson on 31st May 2025 and is correct at the date of publication. Matt has many years of experience of dealing with property work and specialises in new build and shared ownership properties.  His profile on the independent Review Solicitor website and be found here