Buying a first home requires a lot of hard work and planning to save up the amount of money it takes to put a deposit down. Here we look at how to save that all important deposit.
Buying your first home seems almost unachievable these days, as there are so many hurdles to jump over. Getting on the property ladder is so difficult. Building up a deposit, dealing with rising house prices, getting accepted for a mortgage – there are just so many tricky parts to getting your own home. However, that doesn’t and shouldn’t stop anyone aspiring to own their own home one day. If you’re thinking about working towards owning your own home in the future, these tips will help you towards that great goal:
It helps to know the facts before you figure out how to work around any issues. You will need at least 5% of the property value as a deposit, but ideally you will have between 10% and 25% if possible. With house prices so high this percentage can be hard to save so many young people are enlisting the help of their parents and it is becoming more common that parents are taking out guarantor loans to help their children raise a big enough deposit.
You will struggle to get a mortgage if you have a low credit score, or if you do not have a regular income. And whilst guarantor loans may be a reasonable way to raise a deposit (and keep interest rates down) the sorts of loans with no credit check available to those with a poor credit rating will not be so attractive when it comes to interest rates. Lenders will also look at your lifestyle and spending. In terms of where you want to live, it pays to look at the cost of living not to mention the general house sale price to see the sort of deposit you need to be saving. You can get a good idea of what you need using this cost of buying a house guide.
Start as early as you can when it comes to saving. The bigger your deposit is, the better your chances of getting a mortgage lender and a good deal. There is currently news of a new savings account called a Lifetime ISA which will be available in April, where you need to have the account for at least a year before using it, and you get free financial rewards for what you put in.
Save In The Right Places
Save in the right places to ensure you are making the most interest on your money. There are short term, medium and long term accounts to choose from all which have different bonuses and restrictions.
Set A Goal And Figure Out How To Work For It
Set a goal in the future, perhaps in five years time or two years time then work backwards to figure out how much you need to save to reach that goal. For example; if you want to have saved £10,000 in 2 years, you need to save around £416.00 per month every month. Perhaps you need to make extra money to do this, or you need to simply make cut backs. For example; if you buy your lunch and morning coffee for about £10 a day every work day, if you took your own lunch and made a coffee in work in you could save £200 that month. Little savings add up.
Remember, you’re going to be working hard for this deposit but it will pay off when you finally have the satisfying feeling of being approved for that home loan and owning your very own home.