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A Simple 7 Step Guide to Saving Your Mortgage Deposit

Buying a home is the dream of a lifetime for so many of us, and for most of them, it will be the greatest financial investment we ever make. However, to get your foot in the door of home ownership, it is necessary to make a deposit against the mortgage loan. After college, many of my friends started saving immediately for the deposit and mortgage loan in hopes of getting the dream home and starting their dream family. However, 5 years later … and many of us are still renting and some have decided to stay living with parents and relatives!

ID-10028128Image courtesy of renjith krishnan at freedigitalphotos.net

So, You Want to Buy a Home, Eh?

The hard cold facts: Due to tightening financial standards and lender requirements, most mortgage applicants will need to make at least a 5% deposit or even as much as a 20% cash deposit toward their home purchase. It is tough, but not impossible. If you’re serious about purchasing a home, these seven simple steps will help you save for this significant expense.

1. Create a Budget

A budget is simply a set of rules in which you are telling your money where to go. With a budget, you are making your money work for you. Knowing your fixed and irregular expenses for the past three to four months will help you to create a budget. Look through credit card and bank account statements to find out how much you have spent on variable expenses such as groceries and entertainment to decide on how much money to fund that category. One of my favorite websites, Budgets are $exy,  give you a collection of free budget templates you can use to get started.

2. Stick to the Budget

Stick to the budget you have made for yourself. This may mean that you must pass up an opportunity to go out with friends if you’ve already spent the month’s entertainment money. It may also mean using generics instead of name-brand items. You will need to live below your means in order to have money to allocate to the mortgage deposit. The benefits of sticking at it, even if it means eating beans and rice for a while, can’t be under emphasized.

3. Seek First Time Home Buyers Assistance

There may be local programs for first time home buyers that will provide financial assistance for mortgage deposits. When I was living in the UK, for example, the Help to Buy Scheme provided assistance for homebuyers with cheap funding. It was, however, not available for remortgages. The US has similar opportunities, such as the NHSNYC (Neighborhood Housing Services of NYC), so be sure to find programs in your local area!

4. Set Up a Dedicated Savings Account

Place the savings for the mortgage deposit into a separate, special bank account that is not easy to access for withdrawals. This helps to keep your savings safe and all in one place. It’s simple and makes sense!

5. Ask for Gifts

If any of your friends or family want to give you a gift, make it known that you are saving for a mortgage deposit. They may be interested in contributing directly to your savings account. Instead of ending up with unwanted or unnecessary items, you may enjoy seeing your savings grow. Your family or friends may also be able to directly gift you the entire or partial mortgage deposit.

6. Cut Back Cut back on anything but essentials

Your rent, groceries and utilities should be paid but consider cutting out unneeded clothing, entertainment, hobby and leisure purchases. Stick with inexpensive and basic meals to reduce food bills. Lower the thermostat to reduce utility costs. Stuck for ideas? Check out Jess’ article on Easy Ways to Save Money & Food.

7. Earn More

Perhaps you have a collection or a valuable item that no longer holds your interest. Sell it. Have a rummage sale. Ask your employer for more hours or pick up a second job. Put out word that you will do odd jobs such as dog walking.

Hope you find this list helpful. Did we miss anything? How do you save up for purchasing a home?

About Sherrie W.

Sherrie is a part-time contributor to All the Frugal Ladies. She currently works for a small publishing firm in London and enjoys writing about her frugal (and not so frugal) life experiences and lessons learned along the way :)

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  • Jessica J.

    Great first post, Sherrie! I don’t own a home and luckily I don’t hold on tight to those dreams of owning a house. But, you offer up some great tips on saving money that fit in with our overall frugal lifestyle values – thanks for putting this together!

    • Sherrie Woosley

      Thanks, Jessica! It was also a lot of fun. Happy to be here 🙂

  • Aly Mashrah

    I have such a hard time when it comes to sticking to my budget. I always tend to spend more than I should, and it ruins my savings. Great tips!

  • Pam W

    These are great tips. My daughter and her fiance are saving up to buy their first house, so I will have to share this post with them.

    • Sherrie Woosley

      Good luck to your daughter and her fiance! Glad if our tips can help them in any way 🙂

  • Brandi_B

    All very relevant and valid points! Thanks for sharing!

  • Fabulous tips! I try very hard to stick to a budget.

  • Debbie Lamb

    Great info! A budget is key to success!

  • Elizabeth @ Food Ramblings

    COMPLETELY agree!!! Need to focus on these tips!

  • Debbie Denny

    Fantastic tips and advice! agree with these points

  • Liz @ A Nut in a Nutshell

    There’s a lot of discipline involved in a budget, isn’t there? It’s a good feeling when you stay with it though!

  • Nicole L

    Great tips, my husband and I are very frugal but this year I would like to tighten our belts more. Takes a lot of saying no to things!

  • Sorry

    I’m horrible at budgeting. I need to get better.

    • Sherrie Woosley

      Me too, that’s why I’m here – to learn from others as well!

  • blm03

    Great advice! We got married and used the checks we got as part of our down payment. 🙂

  • brett

    Super tips. STOP going out to eat is a big big big one!

  • Still DatingMySpouse

    Great tips! Cut back everywhere you can to add to your deposit savings

  • Brittnei Washington

    Sounds logical, but in this economy, I can see why your friends might have had set backs. I personally don’t think owning is everything. I say that because if it’s not the right timing, it can turn into a disaster and not a great investment. We want to be able to have money to maintain the things outside of even the mortage so we have more on our list of goals in terms of how much money we want to have aside apart from just the mortage and taxes we may have to pay. So this means, if we have to rent a lot longer than most people are willing to because we want to be ready, we are willing to make that sacrifice 🙂

    • Sherrie Woosley

      Right on, Brittnei …. I agree 100%. But, for those who really want the house, it’s good motivation to get them saving and budgeting in the right ways. Thanks for popping in – and I love seeing how you’re progressing with the pregnancy!

  • kSquaredGlamour

    I am looking to buy a home here and love this list thanks for sharing!

  • Cynthia L

    Great tips on buying a home. It is so much harder now than it was a few years ago. It is important to create a goal and really stick to it.

  • I love that saving in a dedicated savings account. I know people who say they’re saving for a house but then because the bank account is so accessible, they’re always withdrawing. Kind of defeats the purpose. Those are some great tips btw.

  • Danielle

    These are great tips, especially sticking to the budget and only essentials – that’s the tough part.

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