It can be daunting to save enough for your first property. First-time buyers need 8 years on average to afford to buy a home. With house prices rising, saving enough might seem impossible.
But thanks to some new government schemes, it’s easier than ever to get on the property ladder. Here’s some essential tips for turning your home-buying dream into reality.
Work out how much you need.
Saving for a deposit doesn’t mean you need hundreds of thousands of pounds. In fact, today deposits typically range from 5 - 20% of the house asking price. So, if you wanted to buy a house for £250,000, you’d need £12,500 for a 5% deposit.
Working out how much you need first can help you budget properly. Have a look around at typical house prices and then do the sums. If that still seems a bit out of reach, don’t worry.
Today, the Council of Mortgage Lenders estimates that 8/10 first-time buyers depend on their parents to get a deposit. If this doesn’t apply to you though, it shouldn’t be a problem. There are plenty of great schemes available. Did you know that some mortgage deals cover all the valuation and legal fees? It’s worth doing your research and discovering what options are available to you.
There’s help available.
Shared ownership is a government scheme available to all households with an income of less than £80k per year (or £90k in London).
Shared ownership enables you to buy a share of a property, making the mortgage and the deposit much more affordable. For example, if you wanted to get a 95% mortgage on a 50% share of a £150,000 property, you’d only need to find a deposit of £6,250, rather than the £12,500 you’d need on the open market.
Help to Buy schemes might also benefit you. With Help to Buy, you only need to find a 5% deposit and the government will lend the rest! Although this scheme only applies to newly built houses, it’s a great way to overcome the hurdle of finding a deposit. Bear in mind though, that you will need to start to repay the loan after five years.
You can find out more about shared ownership and the Help to Buy scheme in our guide here.
Save regularly, even if it’s a little.
Getting on the housing ladder needn’t be impossible, if you create the right habits. There’s tons of easy ways to save each month, even if it’s a really small amount to start with.
Take the savings straight out of your pay. This makes it less tempting to spend and forces you to budget at the start of the month. You can even set up a standing order with your bank, so you don’t have to bother remembering it each month.
Make a list of your regular monthly spends. Can you make a change anywhere? Be realistic about how much you can afford to put to one side. For example, £150 a month can help you save a deposit in 5 years. This clever savings calculator shows exactly how long it will take, depending on what you save.
Set up a separate account.
There’s brilliant instant savings accounts available today. The Help to Buy ISA will give you £20 per month if you save £200 a month. If you save at least £1600 you’ll get a bonus of £400. This ISA enables eligible savers to receive up to £3000 in support from the government.
Price comparison sites can also help you find the best deal. You can save up to £20k tax free in a cash ISA, which usually have the best interest rates.
Having a separate account is great for so many reasons. It makes it less likely that you’ll access and spend the money, and it keeps your precious savings safe (and nicely growing) for a rainy day.
Budgeting needn’t mean you end up eating instant noodles in the dark. There’s smarter, easier ways to save money fast.
Switching gas and electricity providers can save you lots of money. Some auto-switching energy services save customers up to £1,000 in their first year by finding cheaper deals. Switching your insurance every year also will save you plenty - using comparison websites helps you to take control of your spends.
Cutting out your daily coffee could save you £12.50 a week, which adds up. That’s £50 a month that you could be adding towards your deposit! Other luxury items can also be ditched. Why not downgrade your car (if you can bear to), shop at discount supermarkets or take budget holidays?
Find a cheaper way to rent.
If you are lucky enough to have the freedom to choose where you rent, moving home to a cheaper location, smaller room or getting a lodger could save you a significant amount. Spareroom and Gumtree make it easy for you to make comparisons, so have a look in your area- could you be saving more?
Alternatively, more and more people are opting to become property guardians. This comes with a serious set of criteria, so it’s worth investigating. But if you do successfully become a guardian, you could rent for significantly discounted rates.
Try to stay on top of your savings if you can. Small rewards can help you keep going, and checking your balance regularly can help you see the progress happening! It can be a slow process, but it’s totally worth it in the end.
We love helping people find their forever homes. The first step on the ladder isn’t as far out of reach as you might think. Find out more about the options available to you here. Or get in touch with us today for a chinwag on 023 8065 8858.