How to Save for a House Deposit in the UK

Saving for a house deposit is the largest short-to-medium-term financial goal most people will have. It’s also more achievable than it feels if you approach it with the right structure — particularly the Lifetime ISA, which provides government money that no other savings vehicle can match.

Step One: Calculate Your Target

The minimum house deposit for most mortgage products is 5% of the purchase price. But 10% provides meaningfully better mortgage rates and should be the target wherever achievable. On top of the deposit, budget separately for buying costs:

• Stamp Duty Land Tax (often £0 for first-time buyers on properties to £300,000, then 5% on the £300,001-£500,000 portion)
• Solicitor/conveyancing fees: £1,500-£2,500
• Survey: £400-£1,000
• Mortgage arrangement fee: £0-£1,099
• Total buying costs beyond deposit: typically £2,000-£6,000

On a £280,000 property (close to the average first-time buyer purchase): a 5% deposit is £14,000; a 10% deposit is £28,000. Add £3,000-£5,000 for buying costs. Total savings target for a 10% deposit purchase: approximately £31,000-£33,000.

The Lifetime ISA: Start Today Even If You Can’t Save Much

The Lifetime ISA (LISA) is the most powerful tool available for first-time buyers aged 18-39. The government adds a 25% bonus on contributions of up to £4,000 per year — meaning up to £1,000 in free money each year.

For a qualifying home purchase, at least 12 months must have passed since your first payment into the Lifetime ISA. Opening an unfunded account does not start the clock. Check the official withdrawal conditions, including use of a conveyancer and an eligible mortgage.

Conditions for using LISA funds to buy:

• First-time buyer only (never previously owned a residential property anywhere)
• Property must cost £450,000 or less
• Must be buying with a mortgage (not cash purchase)
• At least 12 months must have passed since the first payment into the account

Couples who are both first-time buyers can each hold their own LISA, with each earning up to £1,000 in annual government bonuses. Over five years of maximum contributions, a couple could receive up to £10,000 in government bonuses.

The withdrawal penalty for non-qualifying withdrawals is 25% of the total amount including bonus — meaning you’d receive less than you put in. Open a LISA only if you’re genuinely committed to the first-home or retirement purpose.

Our comprehensive first-time buyer guide covers the full purchase process alongside house deposit saving strategies.

Savings Accounts for the House Deposit Beyond the LISA

The LISA is capped at £4,000 per year. For savings beyond that:

• Easy-access Cash ISA: compare current AER, withdrawal limits and any introductory bonus
• Fixed-rate Cash ISA: check the term and early-withdrawal charge against your likely purchase date
• Competitive easy-access savings account: good if you’ve already used ISA allowance, though interest above PSA is taxable

Making Progress: Practical Tactics

• Automate on payday — a standing order to your LISA and savings account executed the day salary arrives
• Direct windfalls (tax refunds, bonuses, gifts) straight to the deposit fund
• Review the target each year as your property search becomes more defined
• Open the LISA today — even with a minimal initial house deposit — to start the qualifying clock

Frequently Asked Questions

Can I use gifted money as my deposit?

Yes — gifted deposits from family are widely accepted. Your lender will require a signed gift letter confirming the money is not a loan and that no repayment is required. Your solicitor will need to verify the source of the funds.

What happens if I exceed the £450,000 LISA property price limit?

You cannot use the LISA funds for a purchase above £450,000. You’d need to withdraw the money, incurring the 25% penalty. If there’s any chance you’ll buy above £450,000, consider this risk before committing large sums to a LISA.

For LISA providers and current rates, MoneyHelper’s Lifetime ISA guide is thorough and impartial.