Whether you’re coupled up, starting a family, or just craving some space of your own, becoming a homeowner is something many of us dream about. But when you’re stuck either renting or living under someone else’s roof, owning your own home can seem like a dream that won’t ever come true. That first step onto the property ladder can sometimes feel just out of reach for first-time buyers, especially if living expenses are making it hard to save up the thousands of pounds needed for a deposit. So just how can you make that dream a reality? Here are our top ten tips.
Saving up is always easier when you have a guiding figure in mind. Just how much of a deposit will you need to secure a mortgage for your dream house?
The Money Advice Service advises that a bank will want to see somewhere between 5%-20% of the total cost of the house before they’ll agree to put up the rest. So first of all, you’ll want to decide how much you’re willing to spend on your house. It might help to get online and search the areas you like the look of, thinking about any other features you want that might affect the cost of the property such as the number of bedrooms and the size of the garden. When you’ve got a price range in mind, work out what you’ll need to save to make up a deposit. Keep in mind that, according to the Money Advice Service, the bigger your deposit, the better your long-term mortgage rates in most cases!
For many people, making and sticking to a budget might just be the toughest part of saving up. If you’ve never planned a budget before, or never successfully stuck to one, it can be daunting, but without one it could be difficult to tell if you’re saving as much money as possible. Luckily there are plenty of free resources to help you get started. The basics of budgeting will usually involve taking your total income after tax and accounting for any expenses that might come up, so you can figure out how much money you’ll have left each month. This should help you come up with a rough timeline for meeting your savings goal, but you’ll have to take this timeline with a pinch of salt as it’s impossible to predict some big expenses that might come up, from car repairs to friend’s weddings.
Once you’ve got your budget and listed your outgoings, you can take it a step further and look at ways to trim your spending. For many people, a sizable chunk of spending goes on housing costs. If you’re a renter, it’s a safe bet that a lot of your hard-earned money goes to the owner of the property you live in. While this can be a very hard cost to trim, it’s not impossible. If you’re in a position to move, you might think about downsizing to a cheaper property or consider moving in with a family member who could offer lower rent - or maybe even just a contribution toward household expenses if they’re willing and able!
Other areas where we tend to spend in bigger sums include transport and utilities. These are costs that can be hard to cut back on, but again there are ways around it! If you make sure to shop around, there could be a cheaper deal to be found on your phone bill or internet. If you’re a renter, there might not be much you can do once you’ve agreed to pay your landlord a set amount each month, but you could make sure you’re getting the best possible deal on utilities by comparing providers to see if there are better offers on electricity, gas, and water.
From taking advantage of deals on staple items, to switching to off-brand products, there are plenty of ways to wring some savings out of your weekly grocery run. Make sure you have a loyalty card if your local supermarket offers them and use it every time you shop to rack up points that can be converted into vouchers and coupons. It might help to make a few meal plans and alternate them so you’ll have an idea of how much you might spend on food week by week.
Using a savings account with a good interest rate can help to protect your savings from the effects of inflation. But there are all kinds of savings accounts. Some regular savings accounts will allow you unlimited access but cap the amount you can deposit at one time. If you choose a fixed-rate account, you might get a higher interest rate, but you won’t be able to withdraw your savings for a fixed amount of time, be it one year or five. It might be helpful to have a look on comparison sites to get a better idea of what's available to you.
One easy way to save is to set up a standing order for a set amount of money to be taken from your account after your regular payday. This a good idea for several reasons. Saving consistently looks good to lenders, and it’s also a good way to put aside the money you’ve marked for savings before you’ve had a chance to spend it. If you end up having money left over at the end of the week or month, you might still be able to make a one-off payment depending on your savings account.
If you’ve never owned property before, you might be eligible for aid like the government’s Help to Buy scheme. Even if you’re not a first timer, you could meet the criteria for other initiatives like the Right to Buy (which sometimes helps council tenants buy the property they live in) or HOLD (which can support people with long-term disabilities to buy a home on a Shared Ownership basis). It’s well worth a look to see what financial aid is available locally!
While having a savings goal based on your estimated deposit is a great start, it’s probably a good idea to aim higher than you think you need to. There are the obvious extra costs; surveying the property, possible stamp duty and other admin related to the buying process. Then there are the moving costs, like furnishing a new home, buying packing materials, maybe even renting a van or storage space. You might also want some funds set aside for emergencies; for example, what happens if you move in only to find the boiler is broken or there are plumbing issues? While you’re working hard at saving anyway, you might find it’s best to just prepare for any eventuality.
Working towards your savings goal is all well and good, but don’t forget that house prices can always rise and fall. If you check in on the prices of the area you want to live in from time to time, it could help you decide whether you need to adjust your savings goal accordingly. You never know, you might get lucky and reach your savings goal sooner than you think!
While savings are usually the main concern for anyone trying to buy a home, they’re only one part of the puzzle when it comes to applying for a mortgage. While you’re saving up, you might want to ask yourself what else banks and financial institutions are looking for. Obviously, most lenders will want to see a good credit score, and usually favour applicants in steady employment. Find out what else you can do to help make yourself a desirable candidate for a mortgage - you might even be able to set up a meeting with your bank to find out what they’re looking for and how soon you can apply.
We know that scrimping and saving can be tough, but you can take some control of your future with a bit of financial planning. And we're here to help! For more tips on money and family finances, check out our blog, or to find out what Smart Insurance can do for you, click here.