SAVING FOR A DEPOSIT
If you want to get a foot on the property ladder, then buying a home is going to cost you. You must have enough money in the reserve to cover stamp duty and conveyancing fees, as well as a hefty deposit. According to the Council of Mortgage Lenders, the average first-time buyer deposit in 2017 was 17% of the purchase price. With this in mind, saving for a home can seem like an impossible task. However, there are ways to make it easier.
First off - let's remember why you want to save up all that money. Put simply, you are building up a deposit of money that you can use to buy your home.
This is the amount of money that lenders look at when deciding whether or not to give you a mortgage. If you have saved up 20% of the home's value, then you are more likely to be granted a loan because it shows that you are committed and serious about buying. If you have not saved up such a high deposit, it means that lenders may judge your level of commitment and whether or not they're willing to lend to you in the first place.
This may sound like a daunting task with such a large amount to save, but here's an idea. Start with just £10 per week and add that into your savings pot each month. This will build up over time and you'll be surprised at how soon you can increase the amount if it is put aside.
Commitments come in all shapes and sizes, but they can often be the root cause of money problems. Picture yourself at the end of each month with no more money left. How do you make ends meet? What sacrifices are you willing to make to save up for your deposit? Minimising outgoings is a common way to save, and it could help you free up some money each month. This may involve cutting back on certain luxuries and opting for cheaper alternatives or perhaps moving somewhere with lower costs of living.
Having your own savings pot can make you feel more committed to saving up. Imagine having all of your money in one place and feeling the effects of saving up over time. It may be easier to put some cash away each week if you have to physically get out of your seat to get it, rather than dipping into other budgets.
Your credit rating is checked by lenders when considering whether or not to give you a loan. Bad credit ratings may mean you do not get the mortgage at all, so it is worth checking regularly to keep an eye on your rating. There are several ways to check your credit rating - some lenders will let you have a free report each year while some websites offer monthly updates.
If you want to buy a house then it's worth keeping an eye on the property market. Prices may vary depending on your location, but as a general rule cheaper locations mean you can get more for your money. For instance, buying a one-bedroom flat in London will be significantly more expensive than somewhere like Manchester or Liverpool. So, keeping an eye on house prices is a good way to get more bang for your buck.
If you are a council tenant, then you can take advantage of the Right-To-Buy scheme. This means that you will be given money from your local council to assist with your deposit.
Cashback sites are a great way to make savings on the items you were going to buy anyway. By simply clicking through one of these websites, you can get money off at hundreds of retailers while buying the products that you need - for instance if you were to buy a sofa online then you could get a cashback on that purchase.
If you have any relatives or friends who can potentially help, then now is the time to ask them. Perhaps they would be willing to give you a small deposit to put towards your home and thus reducing the amount of work you need to do.
Every time you save into this account, the government will chip in 25% on top of your savings until you hit the maximum amount of £12,000. But remember - you can only put in £200 per month so you'd need to be prepared to wait for it.
Don't let not having enough money put you off buying your property. The first time buyers in London who have managed to save up for a 5% deposit are in the minority, so don't be too disheartened if you fall into this category - there are plenty of schemes out there that could help you achieve your dream of buying a home.
Even if your mortgage lender is willing to give you a loan, it doesn't mean that they will be willing to foot the bill for all of your repairs and replacements. You may also have to pay an extra fee towards the insurance on the property, so remember to factor in all of these costs when you are working out your monthly budget.
It is a good idea to decide how much you can realistically afford before looking at properties for sale. It's easy to get carried away and buy something which is beyond your means, so it is best to set yourself a clear limit that you are not willing to exceed.
Don't forget that there are other fees associated with buying a property, such as legal fees stamp duty. It is also worth remembering that the lender will charge interest at least once a year on their loan so has enough money set aside for this.
There are other expenses associated with buying your property - you'll have to factor in utility bills, council tax and upkeep on your home into your monthly budget. This is where having enough money left over after paying your mortgage each month will matter, so don't forget to factor these things into your budget.
If you're looking for more information on how to save enough money for a deposit, or if you have any other queries about buying a property, then it's worth meeting with an independent financial advisor. They will be able to help you find the right mortgage deal and they will also be able to give you some sound advice on how much you can afford.
While knowing the facts about saving enough money for a deposit will help, you must be realistic about your financial circumstances too. You don't necessarily have to put aside the full 20% if you are struggling for cash - talk to an independent financial advisor about how much you can afford.
It's important that, once you've found out the figure which you will need to save each month to get your 5% deposit together, you re-evaluate your monthly budget. You may need to cancel certain subscriptions or downgrade your mobile phone plan - these are the details that will make a difference.
If you still think that you won't be able to save up enough money for a deposit within five years, then it's worth considering what other ways you could get yourself on the property ladder. You could ask your parents if they will let you use their savings as a deposit, or if they can help with maintenance costs until you have repaid them - this is an approach that some first-time buyers make.
Even though saving enough money to put down a 5% deposit is a priority, remember that it's not the only factor in buying your first home. Location and condition of the property are also vitally important - you can scrimp on an amount for a deposit if you find a property that you love.
The best way to save up enough money to put down a 5% deposit is to set yourself realistic goals. You can even break your goal up into smaller chunks which you can achieve one at a time. If you constantly tell yourself that you will never be able to save enough money for a deposit, then it's unlikely that you ever will!
