Your first home is one of the most important purchases of your life. You are finally stepping onto the property ladder and working towards your own piece of real estate. Your house will be your own private paradise, where you can start a family and begin a new life. But it will take some work to get there.
A home does not come cheap, and the majority of first-time buyers will need to take out a mortgage in order to afford the property. This means you are effectively borrowing the cost of the house from a lender, and will repay it in installments over several years, plus interest.
But you will still need to pay a substantial deposit upfront in order to secure your mortgage arrangement. The exact will vary between different mortgage brokers and plans but the average deposit for a first time buyer in the UK is around 15% of the property’s value. The higher the deposit you can afford upfront, the lower your interest payments will be, and it will be cheaper and quicker to pay off your mortgage in the long run. A larger deposit is therefore the most cost-effective solution.
But how can you afford to pay tens of thousands of pounds in one single payment? If you’re feeling a little overwhelmed by the prospect, here are some tips to raise the necessary capital.
Even if you’re nowhere near ready to be a homeowner yet, it’s a good idea to start saving early. If you are the kind of person that loves to spend their entire paycheck before the next one comes in, you will have great difficulties in securing a good mortgage deal later on. Instead, squirrel away as much money as you can each month into a separate building society or savings account. You can always retrieve some if an unexpected expense pops up but it will help you to build up a sizable pot of money over several years.
If you’re saving money for a future home purchase, you want to be sure you can accumulate as much interest as possible until then. Most banks offer savings accounts, into which you deposit your money and earn a small percentage in interest each month. But a more lucrative option might be a Help to Buy ISA. With these accounts, you pay a certain amount in each month, accumulating interest as you go, and if your savings hit a certain amount, the government will top it up by 25%. This will make a huge difference to being able to afford your deposit when the time comes.
We all have things we spend money on when we don’t really need to. Unhealthy takeaways, pints, streaming services, clothes, coffees. If you created a budget and plotted every single expense over the course of a month or year, you’d be surprised by how much you spend on unnecessary things. No one is saying you can’t enjoy yourself, but you should be more aware of where your money is going and how you can cut down on your spending. For example, by dropping your Netflix subscription and drinking less alcohol, you might be able to afford your dream home a little bit sooner.