Does saving for a mortgage deposit feel like a never-ending battle? Well the good news is you’re not alone, and there are ways you can speed the process up - stayed tuned to find out how.
Climbing onto the property ladder for the first time is one of the biggest financial commitments you’ll make, but it’s also one of the hardest to achieve.
In fact, research by Nationwide uncovered that, on average, it takes first-time buyers around eight years to save the lump sum needed to put a deposit on a property. If you don’t fancy waiting that long to get your hands on your own home, you’re certainly not the only one. So, without further ado, here are some handy hints to get on that ladder sooner.
Renting can be expensive and, to add salt to the wound, you don’t recoup anything (except maybe your security deposit) at the end of your agreement. The amount you’re paying will no doubt vary depending on your location, type of property and number of tenants, but either way, it’s likely to be at least a couple of hundred pounds.
Although it’s not ideal, if it’s an option, consider moving back in with your parents while you save for your mortgage deposit. This’ll instantly enable you to stash away extra savings that can go directly into your mortgage deposit pot.
If flocking back to your family home isn’t an option, see if you can find a more financially friendly living set-up - by moving to a less expensive area or looking into house shares, for example.
Reduce your outgoings
The end of the month arrives. Your bank balance is near zero. You don’t know where your money went. We’ve all been there. Spontaneous spending is something we’re all guilty of, but it can hugely hinder your savings efforts and slow your climb onto the property ladder right down.
To make sure you’re saving every penny you can, sit down, go through your statements, and see where your money’s going. If you can cut out the odd takeaway, unused Netflix account, cinema trip or spending spree, make it happen. Even the smallest of costs can make a difference over time, so be frugal with how you splash your cash.
Hint: work out how much extra money you need each month to afford things like food, transport and the odd social activity. Once you’ve got this figure, after you’ve been paid, make a point of moving the rest of your income into a separate pot so you can’t be tempted to spend it.
Help to buy schemes
If buying a full property is too far into the horizon, why not look into buying part of one? With shared ownership schemes, you buy anywhere between 25% and 75% of a property’s overall value and pay rent on the remaining share. Then, over time, if you can afford to, you may be able to purchase more shares and eventually own the property outright.
One thing to bear in mind with this option is that you’d be paying off your mortgage and rent each month until you own 100% of the property’s shares, so it’s important to work out how much both amount to before you take the plunge to ensure you can afford the payments.
With the help of an equity loan, you only need to save up a 5% cash deposit for the property you’re after, and then the government lends you up to 20% to cover the rest of the deposit. The only snag is that, to be eligible, the property you’ve got your eye on must be a newly built home.
It’s also worth noting that although the first five years will be fee-free, thereafter, you’ll be charged interest on the 20% lent to you by the government.
This one goes against the ‘there’s no such thing as free’ line we’re all so used to hearing. If you’re saving for your first home, the government have what’s called a Help to Buy ISA scheme. With this, they’ve vouched to boost your savings by 25% up to a maximum bonus of £3,000.
So, in practice, this means for every £200 you put in, they add another £50. If you’d like a Help to Buy ISA, you’ll need to open one by 30th November 2019.
If you’ve got a load of bits and bobs hoarded away that haven’t seen the light of day for as long as you can remember, why not sell them off and use them to help give your mortgage deposit a boost?
We said it before and we’ll say it again, every little helps, so don’t be disheartened if the selling price of individual items isn’t huge. It’ll all add up and something’s better than nothing.
To keep track of how much you make from your efforts, remember to make a note of how much you’ve made as you go along.
Tip: to avoid paying the fees associated with sites like eBay and Amazon, look into platforms like Facebook Marketplace and Gumtree.
Have you got any nifty saving tips that helped you get onto the property ladder faster? If so, we’d love to hear them! Get social and share them on our Facebook or Twitter pages.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.