Among the doom and gloom caused by the Brexit chaos, there’s a glimmer of hope for first homebuyers.
Uncertainty that continues to surround the UK economy has dampened property prices further but this is good news for first homebuyers, whom are mostly millennials.
So how can you benefit from the property price slump to get onto the property ladder? If you have saved your home deposit, there’s no delay, get out there and find the home you can afford. 🙂 For everyone else, in this blog post, we provide tips on how to build up a deposit to buy your first home.
Even with a depressed housing market, dampening property prices nationwide, buying a home is still a big ticket item and you’ll need to borrow the majority of the purchase price. If you meet home loan lenders criteria, they’ll happily lend you the funds. However, you will be required to put some funds in too, and this is called a ‘deposit’.
Deposit – How much do I need?
The deposit is usually a percentage of the property purchase price, and it can range from 30 percent to as little as 5 percent depending on the lender and the terms.
If you’re like the majority of wage earners, you’re living from pay packet to pay packet. You’re not likely to have much in the way of saving, and this makes it very hard to come up with the deposit to get onto the property ladder. So unless you can get the deposit from someone else, you’ll need to form a savings habit and put some of your wages into a deposit account ‘before’ you spend it.
So how much do you need to save in total for a home deposit and how much do you need to save every month until you’ve got it?
Start with the end in sight
The trick to working this out is to start with the end in sight. A great way to work out how much you need to save for a home deposit is to work backwards. Start with the total amount required, you will not know the exact amount, but you can get close to it, by doing some research on current entry-level property prices. Then you can break it down into monthly payments.
Let’s say you’ll need £150,000, and you know from asking a mortgage broker or your bank manager that you will need a 20 percent deposit. The math on this is easy: 20 % of £150,000 = £60,000. You need to save £60,000 for your home deposit. Saving this amount of money, looks like Everest, but let’s carry on because you can do it.
Deposit Savings Plan
You can work out how much you can save every month, by first finding where to cut current expenditure.
Lifestyle changes will be necessary if you’re serious about saving as much as you can. Yes, you can cut down on socialising, maybe you need to move back home or move to a cheaper rental property.
Write down all your current outgoings and use a free online budget plan to do the equations for you. Be ruthless in your honesty about how you’re spending your money. How much do you spend on clothes or meals out? It’s tough to own up to frivolous spending, but it has to be done to reach your goal of getting into your own home.
Cut variable expenses
Once you know where savings are made from cutting your variable spending, work out the amount you can commit to a savings account.
The average salary in the UK is around £30,000. If you can save £500 a month – annually you’ve saved £6000, and at this rate, it will take you with interest added around eight or nine years to get come up with £60,000.
Get a second job
Too long? Of course, it is, so what else can you do to bump up your deposit savings plan? Take on a second job. This action can work wonders for reducing your socialising too as you’ll be working when your friends expect you to be with them.
Move home, or house sit
If moving back home is an option for you, do it, as you’re likely to double your monthly savings and halve the time it will take to secure your full deposit.
However, if it’s not an option, there is another way, you can house sit. This is a popular option for holidaymakers and also people who don’t own their own home and don’t want to commit to a rental agreement which is often a fixed term lease.
With house sitting, there is an agreement, and the house sitter will agree to carry out duties while living in the property.
Homeowners with pets will prefer a home sitter to pay for pet accommodation like dog kennels and catteries. Many websites are catering for the matchup of homeowner and house sitter.
As the saying goes: Where there’s will there’s a way. The hardest part of getting on the property ladder is providing your share of the funds – i.e. the deposit, and there are many more ways to add to your deposit, including Government schemes, so do your research and remember ‘opportunity really does favours the brave or the bold’.
Are you a first home buyer in the US? Read this blog post on ways to raise cash for a property.
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