Looking forward to owning your own home?
It’s a great goal to have.
The freedom of having a house of your own can be an incredible feeling. You get to decorate however you want, invest in new rooms and extensions when you’ve got the money and more. Plus, when you’re finished paying off your mortgage, you’ll own a piece of a real-estate that could continue to grow in value.
Of course, while buying a house comes with many benefits, there are also a wide range of expenses to consider too. For instance, the initial cost you’ll need to prepare for is the deposit. Here’s how you can save faster for a down payment on your new home.
Step 1: Figure Out How Much You Need
First of all, you’ll need to determine how much you’ll need to save for your deposit. Remember, most mortgage providers will ask for at least 20% on a first house. However, you might be able to find companies that will accept a 15% deposit instead.
Don’t just go for the highest deposit you can afford either. You’ll need to ensure that you can also manage the monthly repayments on your new house too. A professional will be able to give you some useful advice on how to calculate your expenses. When you’re calculating the cost of your deposit, don’t forget to leave money for:
- Emergency savings
- Moving costs
- Repairs and decoration
- Legal fees
Step 2: Figure Out How Much you Can Save
Once you know how much you need, you can start planning your strategy to get your new house. Look at your budget and figure out how much money you have left at the end of each month after you’ve paid all of the essential costs for things like food, rent, utilities and so on. It’s a good idea to leave a little money aside from your paycheck for “emergency” expenses just in case too.
If you don’t have a lot left to distribute into your savings, look for ways you can cut costs. For instance, using companies like Omacl.co.uk could help you to find a cheaper loan that you can move your current debt into. This will reduce the amount of interest you pay each month. You can also cut costs for insurance and utilities by switching to a new provider.
Step 3: Know your Options
Are you going to have to be patient and wait until you’ve saved enough money for your deposit on your own, or are there other ways that you can speed up the process? For instance, the help to buy scheme in the UK allows young buyers to reduce the cost of their down payment for a new build home. With help to buy, your loan is free for the initial five years; then you need to figure out a new way to pay your yearly fee from year 6 and onwards.
Other ways to reduce the cost of your down payment might be to ask family members for help. Your mum and dad may be able to pay some of your deposit as a gift, or you could consider combining your savings with a friend and buying a house together.
Step 4: Have a Dedicated Savings Account
If you can’t buy your home straight away and you need to do some saving first, then the best thing you can do is separate the money you’re keeping to one side for your house from the rest of your income. Having a dedicated savings account will make it easier for you to avoid spending the money you need for the future whenever you’re tempted to go out for a meal with friends or buy something new.
Some savings accounts can even help you to build up your deposit faster. For instance, if you’re a first-time buyer, you might be able to ask the government to match a portion of whatever you save in a dedicated Help to Buy ISA. Ask your bank about your options here.
Step 5: look for Other Ways to Reduce Costs
Finally, always keep your eyes open for ways to keep costs low.
For instance, some mortgage deals will cover the legal fees and valuation costs for you so that you can save some extra money up-front. If you choose to seek out your deal with a mortgage broker, they should be able to make you aware of any offers that you have access to.
Additionally, if you’re saving for other expenses like furniture and decoration on top of your deposit, you can always look into things like buying second-hand furniture and asking your friends for painting assistance so you can save a little extra cash.