How can I start saving for a deposit?

November 12, 2022

1. Determine an achievable goal

Determine how much of your monthly income you can put away in savings. The moment you are paid, put the money in a savings account so you will not be tempted to spend it. This will prevent you from making unnecessary purchases.

To qualify for a mortgage, you will ideally need to have saved up around 10% of the total price of the house.

Therefore, you will need to set aside £20,000 to purchase a house that costs £200,000.

2. Make every effort to lower your monthly rent payment

Would your parents be willing to have you move back in with them, or would you consider taking a room in a shared home or apartment?

Your monthly rent is probably going to be the single largest expense you have. If you can place it in the bank, it will count against your deposit a significant amount.

3. Open a Lifetime Individual Savings Account

It is an investment plan that also comes with perks. If you can contribute £4,000 per year, the government will match your contribution with an additional £1,000 at no further cost.

To be eligible to apply, you must be between the ages of 18 and 39, but you have until you are 50 to put that money away.

Some stipulations must be met to qualify, such as the maximum purchase price of the property not being greater than £450,000. And you are required to get a mortgage. Here you can discover further information on the Lifetime ISA.

A regular savings account or an individual savings account (ISA) are both suitable alternatives to ordinary current accounts due to the greater interest rates offered by the former two.

4. Reduce other expenditures

Make sure that social gatherings do not cost too much money. Your new go-to gourmet meal consists of handmade sandwiches eaten during picnics in local parks.

Cancel your subscription to the gym; running does not cost anything.

Try to avoid following the most recent fashion trends. It is good to get brand new clothing. They can wait.

Invest in a home with a friend. Reduces the required deposit by fifty percent immediately, so finishing fifty percent of the work in one step.

Ignore what the media is saying about having to give up avocado on toast to follow your goal. If you were to save a deposit of £20,000, it would need you to give up somewhere about 20,000 avocados.

5. Put your trust in the bank of mom and dad.

The practice of first-time buyers receiving financial assistance from their parents in the form of a gift or a loan for a down payment is becoming more common.

To the Mortgage Advice Bureau, parents are now the ninth largest mortgage lender in the United Kingdom. 

Do check to see whether or not their assistance will be in the form of a gift or a loan before accepting it. And if the second option is correct, explain how you plan to repay the money.

By working out the specifics of the situation now, you can reduce the likelihood that any problems may arise in the future.

6. Use a budgeting app

Several cool new budgeting applications might assist you in keeping track of your finances. In addition, some will highlight areas in which you may be able to cut costs even further to accomplish the goals that are unique to you.

Apps like Moneybox, for instance, give you a little push to “round up” the amount of money you spend online to the next round and keep the difference. In addition, you may restrict your spending using app-based financial institutions like Monzo and Starling.

7. Consider a government buying scheme

It is becoming more difficult for first-time buyers to save up enough money for a deposit as housing prices continue to increase. Consequently, it is important to investigate the many available government programmes.

Utilize our in-depth resources to learn more about the Help to Buy program as well as shared ownership options.

8. Can I receive a 100% mortgage?

Since the global financial crisis of 2007, getting a mortgage that covers the whole amount has become almost difficult. On the other hand, there are options for mortgages known as “family offset” or “guarantor.”

Guarantor mortgages allow you to borrow up to one hundred percent of the value of a property because a parent or other relative pledges their assets or savings as collateral.

However, if you are unable to repay the loan, those kind individuals will be responsible for making up the difference; thus, no one should enter into this arrangement carelessly.

Put your heads together, have a respectful conversation about it, and get the counsel of an impartial attorney first.

If you’re looking to sell or let your home with a Lee On the Solent Estate Agent, Stubbington Estate Agent, Gosport Estate Agent, Fareham Estate Agent, Portsmouth Estate Agent then please do no hesitate to email on info@gshomes.co.uk or call on 023 93 960 169.

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