The upside to saving is not only will you have a sizeable deposit when you come to buying your house, you will also be able to demonstrate to lenders that you are able to budget and save and are therefore more likely to meet your monthly mortgage repayments.
While it may feel impossible to save up enough for a deposit, there are various things you can do to ensure you get on the property ladder sooner than you think.
Talk to a mortgage adviser
Whether you have just started saving or are ready to buy your first home, our mortgage advisers can search over 11,000 products from more than 90 lenders to find the right mortgage to suit you and your circumstances. A mortgage adviser will be able to explain all of the options available to you and will look at your income and outgoings to establish how much you can afford to borrow and how much you need to save.
How much do you need to save?
How much do you need to borrow?
You will need to be able to put down a deposit that is equivalent to a certain percentage of a property’s price (e.g. 5, 10 or 15 percent). For example, if you saved £20,000 and the property was worth £200,000 you would have enough to put down a 10% deposit. The higher the value of your deposit, the less you will have to pay each month towards your mortgage.
The larger your deposit the better, as you will be less restricted by future mortgage payments. A larger deposit may also result in you receiving a lower interest rate overall. However, you can still get on the property ladder with a small deposit.
It’s up to you
Therefore, it is completely up to you how much you decide to save. If it suits your circumstances, you may wish to save up with a partner and combine your savings to put a deposit down. Of course, this will take less time. If you opened a joint bank account, your savings would all be in one place. This may make it easier to monitor. However, you need to think about what you would do if the relationship broke down.
Set a goal
Once you have decided how you are going to save (alone or with a partner), you must calculate how much money you need to put aside in the long term. Set a savings goal for the year and split this up into monthly targets.
Of course, you must still accommodate for any current outgoings such as rent, council tax, fuel, food shops, gym memberships etc.
What is your property price range?
Naturally, the larger the price of the property, the bigger the deposit. Prices can be affected by a range of factors such as:
- Location – London properties are always at the higher end of the price scale
- Property Type – Detached vs Semi-Detached
- Current economic conditions – due to COVID-19 properties were in short supply as the housing market closed at the start of the pandemic. The demand for homes was not being met by supply.
Do you have any additional costs?
As well as the deposit itself, there are a few other costs that appear when purchasing a home. There are various closing fees such as stamp duty, solicitor fees and conveyancing fees.
Therefore, you need to make sure that these costs are included in your saving plan. Check this comprehensive guide by the Home Owners Alliance to find out about any hidden costs.
Budget wisely
Budgeting your money and controlling your income against your outgoings can help you keep on top of your finances. You can discover where you can make cut backs to help save towards your deposit.
Consider
It is important with your budget to consider unexpected costs that may occur and be sensible in your estimates. For example, if you’re feeding a family of four, a budget of £150 a month on food is unlikely to be achievable and it would be better to overestimate your food bill, leaving you with some extra food money for the following month.
If you need help managing your finances you can use this budget template.
Making cutbacks
Making cutbacks doesn’t have to be painful. The easiest way to save is to make sure you’re not overpaying on your gas, electric and various insurances.
Changing your provider and finding the better deals can help you save up to £200* a year towards your deposit.
Whilst you might not think you spend a lot on going out, cutting back here and there can make a huge difference. Perhaps start by reducing the amount of times you eat out or go on mini breaks or holidays.
Take advantage of government schemes
The government has introduced a number of different Help to Buy schemes you may be able to take advantage of, all aimed at those struggling to get to where they want to be on the property ladder:
- Help to Buy Equity Loan – If you are a first time buyer and interested in a new build, the government will lend you up to 20% of the cost of your new build home in which you will only have to find the minimum 5% cash deposit.
- Lifetime ISA – If you’re a first time buyer, the Lifetime ISA acts as a savings account; with a few added benefits. You can pay up to £4,000 each year into your account and receive a 25% bonus (£1,000 maximum) from the government.
For more information on the government’s Help to Buy Schemes read our article Help to Buy Explained.
The bank of Mum and Dad
Borrowing money from your Mum and Dad can be a quick way to help buy your own home years earlier than you would without their help. If your parents are willing to help you financially, just be aware that there’s a set procedure to follow, as this money has to be officially gifted.
Please don’t hesitate to get in touch if you need help buying your first house.
