(Newswire.net — November 2, 2021) —
Whether you are a first-time buyer or a property investor, collecting money for a deposit will always be a slightly difficult task. For one, with the way expenses are increasing, it seems almost impossible to save money! Also, with banks and lenders becoming very strict about their mortgage criteria, most potential buyers have to pay at least 20 per cent of the total value of the mortgage as a deposit.
According to Robert Gardner, Nationwide’s chief economist, raising a deposit remains the main barrier for most prospective first-time buyers. He claims that the 20 per cent deposit is essentially 113 per cent of a buyer’s gross national income, which is a record high. As per letting agents in Dunstable, here are five ways that first-time buyers can save money for their deposit.
1 Set up a savings account
As hard as it sounds, it actually isn’t very hard to set aside a certain amount of money every month. It doesn’t even have to be much; you could set aside 10 per cent of your monthly income to save for your deposit. Make sure you keep this money safe in a savings account as you will be able to earn interest on the principal amount every month. Say, you want to buy a house in two years and based on your expected budget, you will need to pay £10,000 as the deposit. In that case, you need to save around £400 every month. However, if you feel that is a little too much, you can always push your purchase by a year, in which case you need to save around £270 every month for three years. By the time the money and interest accumulate, you will have a lot more than you aimed to save!
2 Be mindful of your daily spending
You know that morning coffee you always pick up before heading out to work? It’s time to start skipping that; instead, make some coffee at home and take it with you to work. Instead of going out for lunch every day during your office break, why not pack a delicious home-cooked meal? Instead of buying a new pair of shoes every time you have some extra money, why not transfer the money into your savings account to earn some interest? If you are mindful of your daily expenses, you will end up saving money in no time.
3 Assess your current living situation
Are you currently living on rent? Is it possible for you to shift into a place that might be slightly cheaper? Have you considered living in a co-sharing space? If you are not ready to move, let’s talk about commuting. How far is your home from your place of work? How much money do you end up spending every month on public transport while commuting to work? If you end up living in a cheaper place, or a place that is closer to your work, you can end up saving hundreds and maybe thousands of pounds a month; think of this change as a short term hindrance for a long-term goal!
4 Figure out how much you need to save and work backwards
Before you set off trying to save money, you need to figure out how much you need to save. This means you first need to figure out exactly how much you are willing to spend on your first home. It is always a good idea to sit with a financial expert to figure out a budget for your upcoming purchase, a budget that you can afford comfortably. Once you have a budget in mind, all you need to do is save a certain percentage of that as the deposit. Based on when you want to buy your house and how much you plan to put down as the deposit, you can plan your monthly savings.
5 Get help from the government
The UK government offers various loans such as the Help to Buy equity loan and the shared ownership scheme which allow first-time buyers to get a mortgage without paying a hefty deposit. Also, first-time buyers can take advantage of the mortgage guarantee scheme that has been launched by the UK government. According to the mortgage guarantee scheme, potential buyers can take out a mortgage from some of the top banks in the country by paying just 5 per cent as the deposit, which essentially means a 95 per cent LTV ratio. By using this scheme, first-time buyers can easily climb the property ladder without spending years trying to save for a deposit.
While you are trying to save for your deposit, make sure to work on your credit score alongside. Most banks and lenders will check your credit score in order to determine whether or not you can afford to pay back the mortgage. If your credit score is good, your chances of securing a mortgage, even with a low deposit, are much higher.