The process of saving for a mortgage deposit

The process of saving for a mortgage deposit

June 7, 2023

The process of saving for a home deposit using a Lifetime ISA, as outlined on the UK government’s website, can be described as follows:

*Open a Lifetime ISA: To start saving for a home deposit using a Lifetime ISA, you’ll need to open an account with a government-authorised provider.

Make contributions: You can contribute up to £4,000 per tax year into your Lifetime ISA, and the government will add a 25% bonus on top of your contributions, up to a maximum of £1,000 per tax year.

Wait until you are ready to buy: You can use the savings in your Lifetime ISA to buy a home once you have reached the age of 60, or to save for retirement.
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Using the example of a property on the market for £250,000 with a 5% deposit requirement, you would need to save £12,500 for the deposit. If you contributed the maximum amount of £4,000 into your Lifetime ISA every tax year and received the maximum government bonus of £1,000 per year, it would take approximately three years to reach the deposit amount, assuming no interest is earned on the savings.

For a first-time buyer in England, what advantages are there in the home buying process, considering there will be no property chain:

Improved bargaining power: A chain-free buyer is often viewed as a more attractive proposition by sellers, as they are seen as less likely to encounter complications during the transaction. This can provide a first-time buyer with improved bargaining power when negotiating the price and terms of the sale.

Time is of the essence: A chain-free transaction eliminates the need to wait for other buyers and sellers to complete their own transactions, which can significantly speed up the home buying process.

Increased certainty: Without the uncertainty of other transactions impacting the completion of your own, a chain-free purchase provides a higher degree of certainty and reduces the risk of delays.

Cost savings: Chain-free transactions can often result in lower costs, such as lower legal fees and reduced stamp duty costs as first-time buyers are exempt from paying stamp duty on properties up to £425,000 

Fewer negotiations: A chain-free transaction eliminates the need for negotiations with other parties in the chain, which can simplify the home buying process.


Budgeting and pre-approval: Determine how much you can afford to spend on a property, and consider getting pre-approval (Referred to as an agreement or decision in principle) from a lender by talking with a mortgage broker to ensure you have a clear idea of your budget.

Property search: Start searching for properties that meet your needs and budget. Consider using an estate agent, or searching online for properties available for sale.

Offer and acceptance: Once you have found a property you wish to purchase, make an offer to the seller. If your offer is accepted, you will need to instruct a solicitor to start the legal process and instruct your mortgage broker\lender to start the full application process

Home survey: Arrange for a home survey to assess the condition of the property. Different types of home surveys are available, including a basic condition report, homebuyer report, and full building survey.

Stamp duty: Calculate the amount of stamp duty you need to pay, taking into account any exemptions or reliefs available, such as the first-time buyer’s exemption.

EPC: Obtain an Energy Performance Certificate (EPC) for the property, which provides information on its energy efficiency and environmental impact, the seller should be able to provide you with this

Legal work: Your solicitor will carry out various legal checks and negotiations, including reviewing the contract of sale, title deeds, and any special conditions or warranties.

Effective negotiation: Negotiate with the seller or their estate agent to agree on the terms of the sale, such as the price, completion date, and any other conditions.

Bridging loans: Consider whether a bridging loan is required to help finance the purchase if the completion date of the sale of your current property and the purchase of the new property do not coincide. Bridging loans can be expensive and it is important to fully understand the terms and conditions, including any penalties for early repayment.

Exchange of contracts and completion: Once the legal work and negotiations are complete, the contracts for the sale and purchase are signed and exchanged, and the completion date is set. On exchange of contracts you must insure the building as you will be responsible for the building and on the completion date, the buyer pays the balance of the purchase price and takes ownership of the property and usually moves into their new home, which is usually the most exciting part.

Your home may be repossessed if you do not keep up repayments on your mortgage

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