As a first time buyer, it’s becoming increasingly challenging to acquire a mortgage without a good-sized deposit. In order to have the best chance of successfully applying for a mortgage, lenders now typically require around 20 per cent of the value of the property as a deposit, at the time of writing.
The average price of a home in England and Wales in May 2011 was £161,823. In order to successfully secure a mortgage for a property at this value a 20 per cent deposit of £32,364 would be required – a significant sum by anyone’s standards.
So as a first time buyer how do you go about saving your first home deposit? What sacrifices will you have to make?
Liaise with mortgage lenders
Don’t be afraid to make tentative enquiries with various mortgage lenders and gather as much information as possible as to what you can and cannot afford. You should also investigate the various types of loans available that can be tailored to your income.
Cutting out the ‘extras’
Are you partial to a regular midweek takeaway? Do you buy lunch at work rather than make your own sandwich at home? Could you do without your extravagant smartphone and monthly contract? As difficult as it may be, you should look to tighten your belt as much as possible. Whether that means scrapping your regular takeaways, downgrading your mobile phone contract or simply making your own sandwiches for lunchtime – every little helps!
Learn to live without life’s little luxuries
Saving money for your first house deposit should unfortunately take precedence over life’s little luxury items too. Whether it’s the new car you had in mind to treat yourself, the glamorous round-the-world holiday or your extravagant weekly food shop, such indulgence should be placed strictly on the back burner until you have your down payment saved.
Moving back with your parents
Although you may consider this a backward step, moving back in with your parents is actually one of the most sensible decisions you could make when saving for a house deposit. If your parents appreciate your position they may assist by allowing you to pay just a small token sum toward living expenses. Moving back in with your parents is becoming increasingly common as house prices rise and mortgages are less easy to secure. This will enable you to quickly add to your savings whilst enjoying your mum’s home cooking!
Shop around for the best short-term savings accounts
Discuss your savings options with your bank. Choose a savings account that offers the highest short-term interest rates as well as providing you with the ability to access your funds quickly in the event of finding the home of your dreams.
Aside from saving for your first house deposit, you should also factor in fees for conveyancing quotes and home survey quotes. Purchasing your first home will undoubtedly be the biggest purchase you‘ll have made; therefore it is essential you pay for a survey to ensure the property is sound.
The advice of both a property lawyer and a Chartered Surveyor could save you thousands of pounds in expensive repair costs in the long run.