If you’re hoping to buy your first home, it’s important that you take some time to assess your financial situation and consider the options available to you. Take a look at property prices in your area. If they’re very high, you may need to aim for a smaller home or consider moving to a cheaper area. You’ll need to save at least five per cent of your property price, and you can use a borrowing calculator to get a rough idea of how much you might be able to borrow, based on your current earnings. You’ll need a bit extra for solicitors’ fees, valuations, moving costs and so on, so don’t forget to factor that in.
If you’re saving for a home deposit, you may want to:
Pay off your debts
If you have a lot of debt, it might be worth addressing this before you start saving. It’s likely that you’re paying interest on it, and debt will also affect the amount you are able to borrow. Make sure you’re paying at least the minimum on all your debts each month, and if you have extra cash, pay off the one with the highest interest rate first.
Cut your spending
Take a look at your current spending. Are there any unnecessary expenses (ie memberships that could be cancelled)? Could you buy your groceries more cheaply? Do you buy lunch rather than making it at home? Could you move somewhere cheaper rather than spending so much on rent? Could you switch utility or mobile providers? Are you addicted to shopping online? Do whatever you can to cut back on anything more than essential expenses.
If you haven’t already, start setting some money aside each month. You may not be able to save a huge amount right from the off, but try to get into a habit of saving something each month. Choose a decent savings account or a relevant ISA (a Help to Buy ISA or Lifetime ISA might be worth considering, depending on your circumstances) and set up a standing order so you’re paying in a regular amount. If you’re able to pay in more some months, do so. Make a target chart and keep marking where you’re up to so you can see that you’re moving closer to your goal each month.
Increase your earnings
Perhaps you could ask your boss for a raise or look for a promotion opportunity elsewhere. If not, you might have a business idea that is worth pursuing in your spare time or a hobby that could be monetised. You could make some money by selling unwanted items or offering up your talents, for example babysitting or maths tutoring. Any extra cash you make should go straight into your deposit fund (or paying off debts, if that’s the most pressing need).
Buy with someone else
If you’re struggling to set enough money aside, it might be worth buying with a friend, partner or parent. This is a big commitment, so make sure all parties are aware of the legal implications before you go down this route. Alternatively, a relative or friend might be willing to contribute a gift to boost your deposit, or to act as a guarantor, which might allow you to buy with a smaller deposit. If these are not options, it might be worth considering a Help to Buy or Shared Ownership property, but read up carefully on these options as there pros and cons to both.
Written by: Steven Grimmer
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