Saving a Deposit to Get on The Property Market

Oct 13

Saving a Deposit to Get on The Property Market

More than ever before first time buyers are struggling to get on the property ladder. With the launch of the Government backed help to buy equity loan and mortgage guarantee schemes options for first time buyers have increased but even these schemes relying on having some deposit.

5% is the minimum deposit required, though this would seriously limit your options to a small selection of lenders who may not offer the best rates or flexibility other mortgages offer. For most mortgage lenders, 10% is the minimum deposit required and remember, putting down a larger deposit if you can afford to will actually save you money in interest in the long run. The really good deals become available for those buyers lucky enough to have a 25% deposit. However much deposit you plan on raising, if you add this to the ever increasing house prices in London and parts of the South getting any deposit together can be seriously challenging, especially if like so many you will be paying a monthly rent as well. Here are some useful tips to help raise that all important deposit.

The first thing to understand is the sooner you start saving, the better your opportunities will be. It is never too early to start putting money aside. It is often in our early twenties that people first begin earning a decent income for the first time. It is easy to fall into the trap of enjoying what we perceive as ‘disposable’ income. Many of us focus on our active social life and put off worrying about something as mundane as saving for a house deposit till later in life. However starting to save as early as possible will seriously help with your property opportunities in later life.

Since the credit crunch, interest rates have remained low. Those accounts that pay the most interest currently are paying around 4%, the most many banks will offer. These savings accounts sometimes limit or completely restrict your access to the money for a minimum period of time. However, in this case, not being able to access the money is not a bad thing since it will remove the temptation of withdrawing the money you are saving, ensuring that you will have a deposit at the end of the fixed period.

You could always try reducing the offer you make on a property in order to get the price down. Some vendors will be looking to sell houses fast, which will enable you to buy at a lower rate, thus reducing your deposit.

If you know that the properties you desire will require saving for a few years, ISAs (Individual Savings Accounts) are a brilliant way to save. These accounts require you to save a set amount each month, there is a minimum and maximum amount that you must deposit each month. You will be unable to access the money at all during this period. One benefit is you will not pay income tax, however there is usually a maximum amount you can save in these accounts. Like mortgages, you can opt for fixed or variable interest rate ISAs. The terms and conditions will vary so remember to check this to make sure that you are selecting the best deal that works for your circumstances.

Where and in what manner you are putting money away to raise a deposit is not the only thing that can help you. Look at your monthly outgoings and identify areas that you can cut back. If you order a take-away once a week, limit this to a treat once a month. Look at the cost of your weekly shop and see if there are cheaper own brand items that you can try to make savings, or consider trying other supermarkets that may be able to offer further savings. If you know that you go out for meals, trips to the cinema or nights out, try and limit the frequency. If you are planning on going out, get into the habit of searching voucher websites and apps. If you regularly shop online, take the time to search for voucher codes; websites like Goupon and Wowcher often have some great deals.

Our modern day hair and beauty regime can also be surprisingly expensive so try to cut back in these areas. Try to lengthen the period between manicures, spray-tans, haircuts etc or search for cheaper alternatives. You can often save a lot of money this way, you just need to be willing to try new businesses.

One final way that you can save a lot of money is by temporarily moving back home to live with your parents. This is becoming more popular since it removes rent, council tax, and utility bills from your monthly spend. Obviously this is not without its drawbacks and it is not a feasible option for everyone, particularly if you are in a couple where space would be limited. However, where it is possible, in 12 months alone the savings that you can make can be incredible. Increasingly, many people are considering the temporary sacrifice of having their own space and freedom as well worth it to help them build a deposit in such a short space of time.