Whatever the economic climate, houses prices aren’t getting cheaper.
Which means first-time buyers need to save even larger deposits than ever before.
Recent data shows that the average price paid for a first home has increased by a staggering 39%, from £153,030 in 2008, to £212,473 in 2018.
How much do I need to save?
To secure a mortgage, you need to put down at least 5% of the property’s value as a deposit. The bigger the deposit, the less you need to borrow. But it will also help you qualify for better mortgage rates. Most mortgage providers will say you need to have a buildings insurance policy in place to borrow from them.
Well, these days the average deposit in the UK is around £32-£35K. Unless, you want to buy in London, where the average deposit is at least three times more.
So, what are your options?
Unless you’ve got a high flying job, rich parents or just inherited a property—most people need to save for a deposit to buy their first home.
And, yes this can feel like an uphill struggle—especially with the rising cost of rent and living. Plus, don’t forget it’s not just the deposit you’re saving for, but also stamp duty, legal fees and the cost of moving. There is also the option of obtaining a bridging loan which can help home buyers bridge the gap between their savings and the total needed for their initial deposit.
So, there’s no time to waste. Check out our step-by-step guide to helping you save for a mortgage as a first-time buyer.
Step 1: Set a realistic timeframe
Decide when you would like to buy a property—is it in a year, in a few months, maybe when you get a promotion at work or after you get married. Obviously, the more time you have to save, the larger your deposit. But, don’t forget house prices can fluctuate and prices can go up and down.
Step 2: Check your credit rating
You will struggle to get a mortgage if you have a poor credit rating. So, if this is the case, you need to start working to improve it before you apply for a mortgage.
Here are a few tips to help maintain a good credit score:
- Always use a credit card and make sure you pay it off on time every month.
- Don’t transfer balances.
- Avoid using more than two credit cards.
- Pay all your bills—if possible, try to pay them early or set up a direct debit.
- Don’t check your credit more than once or twice a year.
Step 3: Work how much you need to save
Do your homework and find out how much properties in your chosen area are selling for. Depending on your timescales, make sure you consider the impact of inflation into your calculations.
Step 4: Make a saving plan
Calculate how much you can realistically save every month by looking at your monthly income and expenses.
Take note of how much you have left in your bank account at the end of each month. You can then save the surplus amount. It’s best to set up a separate account so you won’t be tempted to use it for other things.
Next, look at ways you can reduce your expenses.
- Get rid of store cards.
- Downsize your car/mobile/TV plan.
- Avoid takeaways and eating out.
- Be smart about food shopping and buy only what you need.
- Make weekly meal plans.
- Take your own lunch to work.
- Cycle or walk instead of using the car or paying for public transport.
Shop around for a savings account with the best interest rates or other perks and switch over.
Don’t forget to plan for large expenses like a holiday or a new car and include the cost into your monthly deposit saving plan.
Step 5: Get help
In the UK, as a first-time buyer, you can access a range of government schemes aimed at helping people get on the property ladder.
- Help to Buy ISA – this offers buyers a bonus on buying a home to the value of £450,000.
- Help to Buy Equity Scheme – this offers you a 20% loan so you can buy with a 5% deposit.
- No Stamp Duty for first-time buyers when they buy a property up to £300,000.
Step 6: Look for a property you can afford
When you start searching for your first home, be honest with yourself about what you can afford. This may mean a smaller house or opting for a less glamorous postcode.
The main thing is to get your foot on the ladder and buy something. Ideally, your goal is to buy a property that will increase in value over time. And, once you own a property, it’s far easier to sell and get another one.
Seniors can also be first time buyers
For seniors age 62 and older there is a special loan type for purchasing real estate even as a first time buyer allowing for you to purchase a home without having to pay all cash or take out a traditional mortgage payment. With about 50% of a down payment you can purchase a home and live in it for life without payments with exception of maintaining future taxes and insurance. To get an idea of how much you may qualify for use the reverse mortgage calculator at reversemortgagereviews.org.
Need help selling a property?
If you’ve inherited a property and want to sell it quickly to help you buy your first home, but don’t know where to start. Don’t worry. Selling a probate property quickly can be tricky especially if there’s more than one beneficiary.
To avoid dealing with the stress and paperwork, House Buy Fast, are experienced in sensitively helping people to sell their probate property fast. By understanding the probate process, they can support you throughout the sale, leaving you free to focus on finding your dream first home.