The Process

Saving for the deposit on a mortgage

Selecting the right kind of mortgage to purchase a dream home, whether in Australia, the UK or anywhere else in the world, is one of the most important decisions an individual makes in their life. Getting it right is vital, in order to ensure that it will be possible to get the right property and continually make the monthly repayments without landing in deep financial trouble.

There are many different types of mortgages and lenders' rates and conditions will vary tremendously. It usually helps to get professional advice on what will be the best possible answer to one's mortgage needs. It often also helps to make a fairly substantial deposit to keep the amount to be borrowed as low as possible, thereby reducing the ultimate cost of a mortgage.

For this reason, it is a good idea to build up some savings before starting to look for a mortgage. Naturally, this will also take some careful consideration, and here, too, it helps to get some advice. Comparison sites make it possible to compare savings accounts side by side.

By taking advantage of these sites, consumers are able to see all available options without having to spend hours searching through a myriad of different choices. In this way, they can very quickly find some of the best savings rates available.

When comparing these options, consumers will typically find that out of all the available opportunities to save, some of the best savings accounts are represented by individual savings accounts. These particular choices have a range of advantages over other possibilities, beginning with the fact that they offer savers a chance to accumulate funds tax free.

There is also a broad choice of available variations. It is possible to have an ISA that allows instant access to funds should the need arise, for instance. Assuming that the funds to be saved are towards a deposit on a mortgage, however, a fixed rate variation over a specified period may be more suitable.

One thing all of these fixed rate options have in common is the existence of comparatively high AERs. For example, the best option currently available over a one year term carries an AER of 3.35 per cent. Compared to other choices, this is an excellent way to see savings grow quickly.

A two-year term offers even better rates, with the best one at the moment standing at an AER of 3.75 per cent. If the individual is prepared to wait a little longer, a five-year variation can offer rates of up to 4.5 per cent, a figure that is only rivalled by equivalent bonds.

The difference is that the five-year ISA has the advantage of remaining tax free, as long as an upper balance limit is not exceeded, and the minimum deposit requirements are typically lower.

The rate of 4.5 per cent mentioned above, for example, applies to an option that has a minimum investment of only £100, making it a much easier option for an individual on a lower income than a comparable bond, which could have a minimum deposit of thousands of pounds.

All this makes it clear that it is indeed very important to take the time and very thoroughly examine all possible choices. Comparing different options should not be based purely on the available rates, but should also involve the terms and conditions applied to each type of account.

In addition, just like a mortgage, it is important to take personal requirements and possible limitations with regards to budget, etc, into consideration.