From a young age, many of us aspire to work hard through school and become a homeowner. No matter what your circumstance, the idea of buying your first property can be a daunting affair. However, if you have clear and realistic goals in place, getting the money together to put towards your mortgage deposit can be made easier.
Once you have figured out how much you will need to put away each month for your mortgage deposit, here are some simple yet effective money-saving strategies that can help you along the way. Here are some of the steps I took to save up for my mortgage deposit.
CALCULATE HOW MUCH YPU NEED TO SAVE
Most mortgage lenders will lend you four times your annual wage as a mortgage. And in most cases you need to have at least 5-10% off the cost of the property saved as a deposit. However, the more you can save towards your deposit the better (as you’ll need to borrow less). Use a mortgage calculator to work out how much you need to save and what kind of mortgage you can expect with your current salary.
LOWER YOUR BILLS
One of the best ways to free up cash to put towards your mortgage deposit is by lowering your bills. You may not realise it, but you could be paying more than you need for your gas, energy, and water bills. Shop around and look at different providers. During my mortgage application process I was asked about my monthly outgoings (this information is used to access the affordability of the property).
Make sure you check your council tax, cancel any unused subscriptions, switch to a cheaper energy tariff, and look at cheaper broadband and mobile phone packages.
CUT BACK ON EVERYDAY SPENDS
While it may seem obvious, making minor changes to your day to day spending can soon add up over time. Whether it’s shopping at a different supermarket and purchasing own-brand products, foregoing your weekly hairdresser appointment, or walking to work instead of taking the car or public transport, there are lots of changes you can make today. Even your daily cup of coffee can end up costing you hundreds of pounds each year.
MAKE EXTRA CASH
Another great way to save money for your mortgage deposit is by increasing your income. Whether you become a freelancer, set up your own e-commerce store, or run your own blog, many prospective homeowners go down these routes to top up their monthly wage and put the extra towards their deposit.
The best thing you can do to ensure that you get a good mortgage deal is to focus on your employment income. Mortgage lenders want to know that you earn a good regular wage and that your job is safe (that you have a permanent contact).
LOOK INTO A LIFETIME ISA
You can use a Lifetime ISA (Individual Savings Account) to buy your first home. You must be 18 or over but under 40 to open a Lifetime ISA. You can put in up to £4,000 each year, and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year!
Which banks offer a Lifetime ISA?
- Moneybox Lifetime ISA (1.1% incl. 12 month 0.6% bonus) Minimum investment: £1. Interest paid: Monthly. …
- Nottingham Building Society Lifetime ISA (1.05%) Minimum investment: £10. Interest paid: Annually. …
- Paragon Lifetime ISA (0.75%) Minimum investment: £1. Interest paid: Annually.
If you’re serious about buying your first home you really should consider saving your money in an LISA, there’s nowhere else that you will get guaranteed 25% returns on your money.
When it comes to buying a property, the deposit is easily the biggest thing you will need to save towards. Regardless of how much you need to save, there are tons of simple and effective tactics that can reduce your bills and everyday spending, meaning you can reach your goals faster than you imagined.