Homeownership is a dream that can be difficult to realise, depending on your financial circumstances. The advantages are clear: if you own your house, then you’ll be able to build equity in it every month.
You’ll also have greater freedom to modify it according to your personal tastes.
But getting the mortgage in place for your first property purchase means putting down a deposit. So, assuming you aren’t able to turn to the Bank of Mum and Dad, how can this be achieved?
Why First-time Buyers Struggle
The housing market has reacted predictably to repeated interest rate hikes: by contracting. With less money available to finance new purchases, demand has come down, and prices have responded. That said, the average house price in England still showed a twelve-month increase of 1.9%, as of June 2023.
What might be more salient for many buyers is the cost of living. Inflation is particularly pressing when it comes to everyday items of spending, like the weekly grocery shop. If you spend more on the essentials, it follows that you’ll have less money to put toward your deposit.
We’ve already touched upon interest hikes, which have a direct impact on your ability to get onto the property ladder. If lenders don’t think you’ll be able to keep up with the repayments, they will ask for a larger deposit.
In the case of most mortgage lenders, a 10% deposit is a minimum. If you can go above and beyond this figure, however, then you can reduce your monthly payments, and get the mortgage paid off sooner.
Tips for saving
All of these pressures make saving more difficult. But it is not impossible. Let’s take a look at a few worthwhile steps.
Devise a budget
If you know how much you need to save, then you can put a figure on how much you need to set aside every month. If you can hit the target (or exceed it), then you’ll eventually get your deposit together.
Open a savings account
Setting up a savings account will help you to maximise your interest payments. Set up a direct debit, and you’ll never have to worry about saving again – it will happen automatically, behind the scenes.
While the Help to Buy ISA is no longer available to new applicants, the Lifetime ISA can help you get on the property ladder. The government will match 25% of your savings, and you’ll pay minimal income tax on your interest.
Cut down on everyday spending
If you’re spending lots of money on frivolous items throughout the year, then your ability to save will be impacted. Take stock of what you’re buying, and try to eliminate ongoing expenses that you could do without, like streaming services.
Reduce your bills
In some cases, you can actually reduce your bills by paying more up-front. Look into paying annually whenever a discount is offered. Inflate your tyres, insulate your front door, and give up alcohol – you might be amazed at how much you save!