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How To Save Deposit For Your First Home
Saving to buy your first property can be daunting – but having a clear and realistic plan can make it feel much more achievable. The first step is to work out how much you need to save. Your deposit is by far the biggest thing you’ll be saving towards. It will usually need to cover at least 5% of the cost of the property,
The less you earn, the smaller the mortgage you’ll be offered – meaning you may need a bigger deposit than 5% to buy the property you want. If you buy with someone else, you’ll be able to apply for a larger mortgage, and potentially build up a bigger deposit.
After working out how much you ideally need to save each month, you should set a plan for how to achieve it. The bottom line of raising a deposit is that you need to save money. Here are some tips on how to do that.
Work out how much to save each month
The average first-time buyer puts down a 20% deposit on their first home, which could mean finding a daunting £20,000 or more.
Once you know the amount of deposit you’ll need, make a plan to reach this goal. Regular saving is more effective than relying on irregular one-off sums. How long it will take depends on how much you can afford to set aside each month. Be realistic about how much you can afford.
Decide where to stash your savings. Maybe you already have an online bank account letting you set up a separate pot for your goal. If that is not the case, open a separate savings account.
Reduce your bills
Perhaps the most satisfying way of saving money is to reduce your outgoing bills. You can do that by switching your energy bills to cheaper tariffs. Get cheaper mobile phone and broadband packages and cancel unused subscriptions. Check your council tax, If for example, you live alone (and in a few other circumstances), you can get a 25% discount on your council tax bill.
Cut down everyday spending
Making small changes to your everyday outgoings really can add up over time. Check what you’re spending on. Perhaps you hadn’t realised that the daily cup of coffee you buy costs you £600 a year, or that you’ve been spending £150 on clothes every month. Identifying any areas you can cut back on, which can free up substantial amounts of cash to be stashed away in your deposit fund.
Help cut the cost of your rent
Paying less rent is an obvious way to free up money for a deposit, so think carefully about your rental options. You can save money on flat-share, meaning that you can think about moving in with friends who have a spare bedroom or seek out housemates on flatshare websites. Try to find somewhere near your place of work to save on transport. The other option is to try co-living, where you rent your own bedroom but share communal spaces, such as kitchens and work areas, with other tenants. The positives are that you can rent as an individual tenant and bills are usually included, which makes budgeting easier.
Get help from your family
Many parents want to help their children get on the property ladder, and there are several ways to do this.
One option could be to move in with your parents or another family member who might let you pay a low rent or possibly utility and food bills only, to help you save up more quickly.
Some parents might offer a cash deposit to their children, either as a gift or a loan. This will need to be declared to the mortgage provider, and you’ll need to fill out official documents confirming the arrangement.
Make extra money
Increasing your income is another way to boost your deposit savings. There are countless ways you could do this, from doing some extra work in your spare time or renting some of your things or selling stuff you no longer use.
Earn on things you spend on
Use loyalty cards and consider taking out a cashback credit card, which will enable you to earn a percentage of what you spend in the form of a credit on your bill. Use it for all your everyday spending but pay off the balance in full every month, as the interest you’ll be charged could outweigh the cash back you earn.
Cancel your holiday plans
According to a survey, the average cost of going on holiday is around £1,400. So if you’re a couple, then that’s another £2,800 saved. And if you’re an average-sized family, then your annual holiday costs over £3,000. That could be another couple of grand added to your savings.
Saving can be a struggle. Usually, the first few months are your best as you are focused and dedicated. And with saving for deposit being a long-term plan, you may need to find ways to revive your savings at varying points, but also remember there are times to give yourself a break as long as you continue to save your minimum amount.