One of the most exciting times in anybody’s life is the day that they purchase their first home, collect the keys and move in. But it can be a long road to get there and we all know that even getting to the stage where you have saved enough to start thinking about mortgages, can be a long, long slog.
This post aims to give you some practical tips that can help you save that deposit and get on the property ladder.
How much do I need?
The very first question to answer before we even start to look at how to save, is ‘how much do you need to save for a deposit. Typically, at the time of writing, 5% of the purchase price is the minimum you will need as a deposit.
On the average UK house price for first time buyers of £212,473 – that would be £10,624. Realistically you could probably find a suitable house of much lower value to reduce this amount – but even so, if you can save more than 5% then you are going to be able to access better mortgage deals.
Saving up such a large amount of money can feel like an insurmountable challenge. Here we offer some tips to make the process easier and more effective.
#1 – Work out how much you can afford to save
Even with the greatest will in the World, if your available income after expense each month is £500, you aren’t going to be able to save £600 per month – the number just don’t stack up.
Instead you should set yourself a realistic savings target for each month. Work out your disposable income after all of your expenses – and be ruthless here. There is no point pretending that your expenses are lower than they are as you will only be cheating yourself. Once you have your disposable income, decide how much you are going to be able to put to one side to save for your house deposit, without detrimentally impacting your day to day life.
#2 – Ensure you set up a standing order
Probably the best way to ensure you don’t spend the money you have earmarked for your deposit, is to transfer it out of your account as soon as it is paid in.
You can set up a standing order to move your deposit money straight out of your current account on payday, and straight into a savings account. If the money is less accessible then you may well be less tempted to spend it on a night out or on a shopping spree whim.
#3 – Take advantage of government incentives
A Lifetime ISA may be exactly the extra help you need to get on the property ladder.
With a Lifetime ISA you can save up to £4,000 per year – and the government adds 25%. This means that for every £4,000 you save, the government chips in £1,000 of free money. It’s a no-brainer.
There are some restrictions on who can open a Lifetime ISA – you must be aged between 18 and 40 – but if you qualify, then you can learn more about it here.
#4 – Reduce your outgoings
Obviously, the more you don’t spend the more you will have available to save. There are various ways you can cut down your expenditure (make your own lunch, reduce any unnecessary subscriptions you pay for, etc etc) but if it is an option, one of the most dramatic ways you can reduce your expenditure is to move back in with your parents.
This won’t be for everyone, and it won’t be a viable option for everyone – but with the average UK rent exceeding £750, even if you still contribute to the housekeeping, moving back with the parents could help cut this figure significantly.
#5 – Keep positive
It may be hard in the short term and you may have to give up a couple of luxuries in the short term – but if you stick to your savings goal then you will have a clear date at which you will reach your target, and that first home will be in touching distance. Good luck!