New Homes blog
10 WAYS TO SAVE A DEPOSIT FOR YOUR FIRST HOME - BY ANDREW LOVEDAY
Buying your first home is a big step in your life: finally getting the keys to your very own property is an exciting moment that makes the journey to get there all the more worthwhile. However, for many first time buyers, rising house prices and high initial deposits can make it seem like an impossible task, but no one should lose hope!
Despite the average deposit for a starter home rising to what can seem like daunting levels there are plenty of ways to save, maximise your chances and help you on your way to buying your first home. Here are my top tips:
- Help to Buy: Investigate new homes that are eligible for the Government’s Help to Buy scheme. You only need a 5% deposit and a mortgage for 75% of the purchase price and the Government will contribute the remaining 20% interest free for the first 5 years. It is a much faster route to your own home. Find your local Help to Buy agent here
- Look for incentives: Some developers have created incentives to help out first time buyers such as Countryside’s ‘Bank of Mum & Dad’ scheme, where parental assistance is rewarded with cash payments.
- Set goals: Use a mortgage calculator to work out a realistic amount per month, remembering that a mortgage is typically 4.5 times annual income. From here you can work out how much deposit you will need and calculate how much you will need to save over a certain period of time, for example: £4,800 per year is £400 per month.
- Make a budget: Look at your income and map out all the essentials you can’t avoid or reduce, for example rent or your commute and calculate your disposable income from there.
- Review your outgoings: Some costs on your budget will be unavoidable but it doesn’t mean that the amounts you pay are finite. Could you save money by switching energy suppliers? Or shop at a different supermarket?Could you cycle/walk to work instead of driving or even switch to a pay-as-you-go mobile?
- Be realistic: Just because you’re saving doesn’t mean you have to torture yourself! If you enjoy your morning coffee or a drink on a Friday night, there is no need to deprive yourself. If you know deep down you’re unlikely to get up earlier to cycle into work in the rain then don’t factor it in! Cutting back where you can and allowing yourself some perks means you’re more likely to stay on track.
- Reward yourself: Give yourself a small incentive if you achieve your monthly goal, for example a trip to the cinema or a takeaway. It will make your saving experience more positive. Every month you hit your goal takes you a step closer and it is something that should be celebrated!
- Move back in with your parents: Some savers decide to move back in with their families while they save for a deposit. Moving back home might seem like a retrospective step but it does help free up cash that you can then use towards the deposit.
- Combine your income: The average income you need for a starter home is around £38,917 but that doesn’t mean you have to go it alone. Buying with a partner, family member or a friend will halve the amount you need to save and open up the opportunities for where and what you can buy.
- Review your savings: Use comparison websites to find an account tailored to your needs and then review your account once a year to ensure you’re getting the best rate of interest. It’s also worth setting up a Help to Buy ISA, which works by boosting your savings with additional Government cash. For each £200 that a first time buyer saves towards a deposit for their home, they will receive a top up of another £50 from the Government. This is up to a maximum of £3,000 per ISA holder or £6,000 for a couple. For more info see the Government's guidance here
So there are lots of ways to save for a deposit. To start out with you just need to look into what works best for you.