How To Boost Your Deposit - Tips for First Time Buyers
How To Boost Your Deposit - Tips for First Time Buyers
Deciding to buy a home is a big step in anyone’s lifetime, and as well as proving you are able to afford the monthly repayments, you will also have to have a fair amount of deposit saved up to put down on any property. Most banks ask for at least 5%, and with the introduction of the new 95% mortgage scheme for First Time Buyers, it’s becoming easier for younger people to step onto the property ladder. Despite this, it’s always beneficial to have saved up a bit more, even up to 15-20% if you want to look at better mortgage rates and lower repayments.
This may seem like a scary prospect, but you’re not alone. It’s never too early to start saving for a home, so even if you’re many years off the goal, it’s ideal to start saving as soon as possible. Read our tips below on how to maximise your savings for that all important purchase.
How much do I need to save?
This will solely depend on the price of the property you are aiming for. Most banks will want at least 5%, which means you will have to save £7,500 for a £150,000 property. It’s always possible to get better rates and smaller repayments when you have more of a deposit, so we recommend saving at least 10% of the price of the property.
To work out how much you’ll likely have to spend on a new home, you’ll have to look at the average property prices in the area where you are looking to buy. You should be looking at anything from one bedroom apartments and maisonettes, to two or even three bedroom houses.
Many new build developments will also allow you to buy off-plan, and will often have price lists available for houses that will be available to buy in the future, therefore contacting a local developer, or a national developer who is building in your area for their prices, will be a good indicator of the cost of houses in the area.
Plan a savings goal and a monthly budget
If you have a monthly income, the first thing you should be doing is planning how much you want to save and how long you have to save this amount. By doing this, you can work out how much money you will need to put away each month, and budget for this accordingly. For example, if you want to save £6,000 over 12 months, you will need to put away at least £500 each month, but if you want to save this over 2 years, you’ll only need to put away £250.
Alternatively, you decide how much you want to save, and how much you can afford to put into that savings bucket each month, which will then tell you how long it will take you to save that amount. But it’s important to stick to this monthly budget and ensure you save each time so that you meet this goal when you need it.
Give yourself a monthly budget on spending, then put away the rest into a savings account where you aren’t able to access the money with a bank card - you then can’t be tempted to use it for something else! Don’t be afraid to put aside a bit extra if you have left over funds each month, this will mean you reach your goal quicker!
Buy with someone else
Saving for a deposit and being able to get a mortgage is a lot easier when there is more than one person involved! Whether you are buying with a partner, a friend, or a group of friends, you can all be saving towards the same goal and get to having your full deposit quicker! It also means that you will be getting a mortgage together which makes it a lot more affordable as you will be combining your incomes together.
Apply for a Lifetime ISA
A Lifetime ISA (Individual Savings Account) is a savings account that you can use to help you buy your first home, which you can put up to £4,000 a year into. You will not be able to access these funds until you close the account.
You can use a Lifetime ISA to buy your first home or save for later life when you retire. You must be 18 or over but under 40 to open one. The government will add a 25% bonus to your savings when you close the account and receive the money, up to a maximum of £1,000 per year, but this bonus is only accessible if you are using the money to buy a home, or when you retire.
Buy somewhere cheaper
If you have looked at the house prices where you are looking to move and they seem like they’re going to be too expensive for you to afford, then consider looking around 15-30 minutes out of this area as it’s likely that the house prices will be very different. If you’re looking in the centre of a town or city, look in the outskirts and research whether there are good local transport connections that get you where you need to be. If you live or work in a city and this would be an ideal location for you, consider looking at a town or village further out and look into commuting - you might save more money on a cheaper property and commuting than buying a more expensive house!
Cut down on weekly spending
It may seem like the obvious thing to do, but seeing if you can cut down costs on your weekly food shop, evening out or weekends away can really make a difference to your savings pot. This could mean one less meal out a month, cutting out a takeaway, or only buying a coffee two days a week instead of five! You could see how much you can save at the supermarket but cutting down on branded products, or using more coupons that save that little extra 5% - over a span of a couple of years, this will make a huge difference on your disposable income! If you write down each time you save money in this way each month, you can see the numbers adding up fast and you’ll have a real sense of achievement when you save that first £100.
Cut down on current bills
Look at what you are spending monthly on bills such as gas and electricity, broadband and Wi-Fi and see if you can find anything cheaper. There are lots of websites out there that let you compare the bills in your area for free, and will even sort the switching over to a new provider for you. Even a saving of £5-10 a month will make a big difference to what you can afford to save.
Living with your parents? Start to save what you would be spending on rent and bills if you can afford to do so - this will add up really quickly!
Don’t forget about the additional costs
There are many additional costs that are incurred when buying a house, such as solicitor fees, moving fees and property searches, so make sure you are including this in your budgeting. You can find out more about additioal fees here.
Ready to start looking for a new home? Start your search today!