For many people, owning a property is a key milestone in life which seems further away than ever before. One of the obstacles which is presented to people is saving up enough to afford the deposit on their ideal home. While saving up for the deposit on your first home can see like a daunting task, by taking the proper steps you can cut it down to size and manage your saving properly to bring your dreams of homeownership closer to reality.
Step 1 – Identify the best property type for your means
Almost everyone has a dream home which they’d love to own, but you also have to be grounded with your expectations. Taking a realistic approach to your property purchase journey will avoid disappointment in the long run.
If there’s a city or town you want to live in, look at that property market as a whole and break down your searches into the different key property types. Some will be cheaper than others, such as flats and terrace houses. You should have a rough idea of your monthly income and mortgage calculators can help you find out what your maximum budget might be. You might also have other factors to consider, like the number of bedrooms and transport links.
Step 2 – Calculate how much you will need and break it down
Once you have an idea of what the average property price of your desired area is, you can work out the amount of deposit you’d need in order to be able to afford it alongside your mortgage.
At this point, you’ll need to break down that house deposit amount into a monthly figure. This might depend on how long you want to wait before you buy, but it’s important to be realistic in how much you can save per month. For example, if you’re looking at a property worth £150,000 then a 10% deposit comes out at £15,000. In order to save that much in 5 years, you’d need to average savings of £250 a month.
Step 3 – Explore the ways you can increase your monthly savings
Knowing how much you’ll ideally need to save each month on top of your current expenses (rent, bills, etc.), you can start finding areas where you can start saving money. This might be revaluating what you’re spending money each month or cutting out specific costs entirely.
Regular saving is more effective than one-off deposits into a savings account, as it gets you into the habit of putting that money away and knowing the limits of your spending. By opening a separate savings account, you can set up a monthly payment which moves a set amount into that account on a specific date. This means you can always move money over just after payday once you’ve settled your bills for that month.
Choosing the right bank account to save with will also help you to maximise your savings, with Help to Buy ISAs and Lifetime ISAs being key products designed to help first time buyers get on the property ladder.
Step 4 – Be patient and plan accordingly
Inevitably, saving takes time. Reviewing your savings on a yearly basis can help you keep an idea of how far away you are from your goal, and it can be worth looking back over the property market every so often to see if prices are moving at all.
It can also be worth moving your savings around. Certain accounts will appeal to new customers with introductory bonuses for the first year, but then fizzle after that. By moving your money to a new account at the end of your first year, you can take advantage of more introductory rates and bring you closer to your savings goal.
Following these steps will set you on your way to being a homeowner, with a specific savings goal to work toward and a timeframe to do it in. The biggest thing to remember is that the best time to start saving for your house deposit is right now – the sooner you start, the sooner you’ll reach your goal!
Article from HouseBuyers4u