Thinking of buying your own home? It is a dream many people have. However, before rushing into the property market, it is wise to have an idea of how much funding will be required – not only the price of the property itself, but the additional expenses as well, mainly the down payment of the deposit and mortgage payments. Once the location is decided upon, research needs to be done on the prices of property in that area. Browsing websites and property calculators are available online to check on prices and the mortgages available. If in east England, the expert Estate Agents in Chesterfield can offer guidance.
While paying for the deposit and continuing mortgage payments may seem daunting and very long-drawn-out, we offer 6 tips for saving to help overcome the burden.
Setting a Goal:
When a large amount of money is concerned, it is best to set a goal. Once the location has been decided on, and the above research conducted, a budget should be worked out against the funds available. Rather than choosing a property which may be out of your budget, it is better to check the mortgages available within the budget and then look at properties within that figure. Goals need to be realistic and will help focus on saving.
Opening a Savings Bank Account:
If you do not already have a Bank account which allows a “goal pot” (where money is saved for a specific purpose), then consider opening a savings account, maybe a long-term one, where the interest will be higher. Some Banks offer the facility of “rounding up” bills – if you spend an amount of GBP 4.90 on an item, the transaction is rounded to GBP 5.00, with the difference between the amount spent and debited to the account being moved into a savings pot. A recurring deposit, with an affordable amount put away every month, could mature into a reasonable savings.
Cut Down on Spending:
Having an idea of your expenses can help in decreasing them. There are apps which automatically identify the spending into categories. Some simple ways can be found which can add a lump sum to the savings – like taking a packed lunch instead of buying outside food, cutting down on tea/coffee, buying unnecessary items etc. Saving by spending only on essentials and not on luxuries can add to that savings packet. According to HSBC “The 50-30-20 rule is a useful guide to help you manage your spending.” 50% on living expenses like rent, food, transport, 30% on wants and 20% on savings.
Some other tips to reduce bills are by moving and paying less rent, if feasible. Also switching energy bills to cheaper tariffs if permitted by the landlord. Sometimes, a 25% discount is applicable on council tax bills, so this should be checked out. Cancelling unused subscriptions and looking at cheaper internet packages could also help.
Get a Lifetime ISA:
A LISA (Lifetime Individual Savings Account) can be used to buy a first home. An age limit of over 18 and under 40 is required. An amount of GBP 4000 can be put in every year towards the annual ISA limit which is GBP 20000 for the tax year 2022-2023. The first payment should be before you are 40 years and the payments can go on till 50 years. There are other terms to be aware of when withdrawing money from this LISA.
Avail of Government Schemes:
The 95% mortgage scheme allows people to secure a mortgage with just a 5% deposit. Also, on the LISA, with the monthly/lump sum payments, the government adds a bonus of upto GBP 1000 a year, until the age of 50. Even though the Help To Buy scheme is not available to newcomers, the Right to Buy scheme allows “eligible council and housing association tenants in England to buy their home with a discount.”
All details will have to be clarified but, if eligible, these could be a good way of saving for that house deposit.
Increasing Income:
Besides earning extra money by freelancing in spare time, selling unused items or various other methods, increasing income on your expenses is also a way. By taking loyalty cards or a cashback credit card, a percentage of the expenses can be saved by credit on bills. Using a credit card can also improve credit score, which is important for mortgage applications. However, care should be taken to use it responsibly and to pay the balance in full so that no interest will be charged to counter the cashback received.
Conclusion:
It may seem like an insurmountable hurdle to save money for a house deposit. However, by setting a goal, focusing on it and working towards achieving it can make your dream a reality.
