Lots of people dream of no longer living with their parents or throwing money at their landlord every month and instead buying their own home in Tower Hamlets. However, one of the things that often stands in the way of first time buyers is raising a deposit. The average house price in the UK is just over £296k according to latest figures from the ONS, and nearly all mortgages require a 5% deposit, so that’s a large amount to save.
With this in mind, here are some ways you can raise the cash to get on the property ladder.
1. Look carefully at your outgoings
While you may think you’re living quite frugally, most people have some areas where they can cut back a little. For example, if you buy a £3.75 takeaway coffee every working day, that works out to £75 a month or a whopping £4,875 over five years. Even chipping away at these small expenses can improve your finances, and when it comes to applying for a mortgage, you can show that you have a pattern of sensible spending.
One big outgoing that non-homeowners have to deal with is rent. While it’s not the most fun solution, if you can move back with your parents for a year, then you could put away more cash. The loss of freedom may be worth it if it means you aren’t stuck in rented accommodation for years to come.
2. Get a side hustle
Many millennials now have a full-time job and a side hustle, which is something they do in their spare time for a little extra cash. Side hustles are often creative or a little more interesting than your day-to-day job, from selling handmade items on sales platforms like Etsy to creative writing, but if you don’t have a particular skill in these areas, then you could always consider selling things on eBay or Vinted, evening bar work, or anything that fits in with your work schedule. Remember there may be tax implications with side hustles, depending on how much you earn, so it’s important to explore these options thoroughly.
3. Ask for family help
If your parents have the savings and are willing to give you money towards your deposit, then you will no doubt be pleased to take it. However, you need to consider the impact on your mortgage application. Mortgage lenders will still want to know that you can afford the mortgage repayments and will need a signed declaration from your parents that the money is a gift, and you aren’t going to be paying them back.
According to The Guardian, the proportion of first-time buyers relying on help with deposits from their parents has risen from 27% to 37% in a year. If your parents have the savings and are willing to give you money towards your deposit, then you will no doubt be pleased to take it. However, you need to consider the impact on your mortgage application. Mortgage lenders will still want to know that you can afford the mortgage repayments and will need a signed declaration from your parents that the money is a gift, and you aren’t going to be paying them back.
If your parents don’t have the savings to help you with cash, they may still be able to give you a helping hand onto the property ladder. For example, some banks now offer 100% mortgages that are secured against your parents’ home. However, it’s important that you do your research before you take out this sort of product as it is a huge commitment.
4. Take money out of your account at payday
Many people wait until the end of the month, see what’s left over in their account, then transfer that into their savings account. However, a better way to save is to work out what you need to live on for the month, with a little cushion for emergencies, then set up a payment for anything left over on payday. This means you’re more likely to live frugally throughout the month.
5. Move to a cheaper area
If rent, travel and other outgoings are wiping out your income each month, a solution may be to move to a cheaper area whilst you save for your deposit. Living in a trendy or central location can add to your quality of life, but it can also significantly slow down your saving progress. Consider exploring suburbs or smaller towns that offer a more affordable housing market. While the commute might be a little longer, the savings you accrue can make a huge difference in reaching your deposit goal faster. Remember, you can always revisit the idea of moving to a more expensive area once you’ve established yourself on the property ladder.
Read: Tips for Making an Offer: First Time Buyers
6. Lock away your savings
When interest rates are high, it’s worth considering taking out an ISA (Individual Savings Account). These products allow you to save tax-free, and if you choose an ISA where your money is locked away, with penalties for early withdrawals, you’ll usually get a far better interest rate. This can also stop you dipping into your savings.
7. Buy with a friend
Getting on the property ladder can be tough if you’re single. It’s slightly easier if you’re a couple with two incomes, as you can both save and the mortgage will take both incomes into account, but you don’t have to be romantically involved to share a mortgage! Ideally, it should be someone you’ve lived with before, perhaps a long-term roommate, and someone who is financially responsible and you’re potentially happy to live with for years!
You may also be interested to read: First Time Buyer Mistakes and How to Avoid Them
10 Essential Tips for First Time Buyers
Get Help Planning Your Deposit Savings And Stay On Track
If you want to get on the property ladder, there are many ways that you can do so. Whether you make small or large lifestyle changes to get there, it will be worth it in the end.
For impartial first time buyer advice contact our expert team at City Realtor on 0207 790 7702 and we will be delighted to help.
Frequently Asked Questions About How to Save For a Deposit
Can I save for a mortgage deposit while still paying rent?
Yes, it’s entirely possible to save for a mortgage deposit while continuing to pay rent. Explore ways to save money effectively while meeting your monthly rental commitments.
How can I maximise my savings for a house deposit using traditional savings accounts?
A traditional savings account offers a secure way to save for a mortgage deposit. Look for accounts with competitive interest rates to grow your savings towards your property deposit.
Why is a good rental history important to mortgage lenders?
Maintaining a positive rental history demonstrates your ability to manage monthly payments, which can enhance your credibility with mortgage lenders when applying for a property deposit.
What role do property prices play in saving for a mortgage deposit?
Property prices impact how much you need to save for a mortgage deposit. Keep an eye on market trends to set realistic goals for your property deposit savings and future property purchases.
What Next?
Do you require a valuation or no-obligation advice on buying or selling a property in Tower Hamlets? Please contact our expert property team at City Realtor on 0207 790 7702 or email us at admin@cityrealtor.co.uk, and we will be delighted to help you.
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