Save for a House Deposit — Compound Interest Calculator
Saving for a house deposit is one of the most common financial goals in the UK. With the average first-time buyer needing a deposit of £30,000–£60,000, compound interest can meaningfully accelerate your progress — even over shorter timeframes. Saving £500/month at a 4% return over 5 years gives you approximately £33,000. With a £5,000 head start, you'd reach about £38,000. For house deposits, consider using a Lifetime ISA (25% government bonus on up to £4,000/year) alongside regular savings.
Illustrative estimate only — not a guarantee
~£39,254 after 5 years
£35,000 contributed + £4,254 interest
Based on a hypothetical constant return. Actual returns will vary.
By the CompoundWise Team · Updated April 2026
UK-based financial education · Not financial advice
Invest £500/month for 5 years at 4%
£4,254
earned in interest alone
Total value
£39,254
You put in
£35,000
To reach £39,254, most UK investors use a Stocks & Shares ISA
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Compared to investing at 4% vs a 4% cash savings account
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Your Personalised Insights
- Your money earns ~£2/day in interest — that's £4,254 earned while you sleep.
- Saving just £50 more per month would add £3,315 to your final balance — that's £3,000 invested for £3,315 extra.
- 5 more years would add £41,825 — nearly 107% more, showing how powerful time is.
- Consistency beats timing — investing £500/month for 5 years matters more than picking the perfect moment to start.
- At your current plan, you reach £25k in 4 years. That's a real milestone — and it compounds from there.
- Your £500/month (£6,000/year) fits within the £20,000 ISA allowance — all growth could be tax-free.Invest it tax-free →
- 11% of your final balance is pure compound interest — money your money made.
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Year-by-Year Progress: Saving for a House Deposit With £5,000 Head Start
Starting with £5,000 and saving £500 per month at 4% returns, your balance reaches approximately £11,260 after year one. By year two, you have roughly £17,710 — enough for a 10% deposit on a property worth £177,000 in many parts of the UK outside London. Year three brings approximately £24,360, and by year four, you cross £31,000. At the five-year mark, your total reaches roughly £38,100, including approximately £3,100 in interest earned. If your target is a £40,000 deposit, you are just two or three months beyond the five-year mark. For a £60,000 deposit (suitable for London or the South East), you would need roughly eight years at this savings rate, or you could increase monthly contributions to £750 to reach the target in about six years.
UK Government Schemes That Accelerate Your House Deposit Savings
The Lifetime ISA is the most powerful tool for first-time buyers aged 18 to 39. You can contribute up to £4,000 per year and receive a 25% government bonus of up to £1,000 annually. Over five years, that is £5,000 in free money on top of your savings. The LISA can be used for properties up to £450,000. Combine this with your regular savings strategy: direct £333 per month into a LISA (to max the £4,000 annual limit) and the remaining £167 into a standard savings account or cash ISA. The Shared Ownership scheme allows you to buy a 25% to 75% share of a property, reducing the deposit needed. Help to Buy equity loans have ended for new applications, but shared ownership and First Homes (30% discount for eligible buyers) remain available and can significantly reduce the deposit barrier.
How to Start Your House Deposit Savings Plan Today
First, set a realistic target by researching property prices in your desired area using Rightmove or Zoopla. Most lenders require a minimum 5% deposit, though 10% to 15% secures better mortgage rates. Calculate your target and use the calculator above to find the monthly savings needed. Open a Lifetime ISA if you are eligible (aged 18 to 39, first-time buyer). Direct up to £333 per month into the LISA to maximise the government bonus, then save any additional amount in a high-interest cash savings account. Avoid investing your house deposit in equities unless your timeline is at least seven years away — the risk of a market downturn reducing your deposit at the wrong moment is too high for shorter periods. Review your progress quarterly and adjust your savings rate as your income changes.
What If You Saved £750 Per Month Instead of £500?
Increasing your monthly savings from £500 to £750 while keeping the £5,000 starting balance and 4% return dramatically accelerates your timeline. At £750 per month, you reach £30,000 in about 2 years and 9 months, compared to 4 years and 2 months at £500. A £40,000 deposit arrives in roughly 3 years and 8 months versus 5 years and 3 months. For a £60,000 target, the difference is even more striking: approximately 5 years and 8 months at £750 versus 7 years and 8 months at £500 — saving you over two years of renting. At average UK rent of £1,200 per month, those two years of earlier home ownership could save you £28,800 in rent payments. The extra £250 per month in savings quite literally pays for itself many times over.
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Common questions
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