Saving a large sum of cash while covering all your living expenses during a cost-of-living crisis is no mean feat.
But having a good plan and clear goals can make this daunting task more achievable.
Here are some tips to help you save for a mortgage deposit.
Number crunch
You’ll need a deposit that’s at least 5% of the value of the property you wish to buy. However, some FTBs aim for 10% or even 20% so they can secure a better mortgage deal.
Bear in mind that you’ll also have to pay legal, surveying and mortgage arrangement fees. Depending on where in the UK you buy and the price of the property, you may also have to pay stamp duty.
Budget
Once you know how much money you need to save, take a deep dive into your income and expenditure. Identify what you can trim back on (nights out) and cut out altogether (subscriptions, gym memberships).
Also, explore new ways of doing things. For example, buy second-hand clothing from platforms such as Vinted and Depop instead of shopping on the high street.
If you’re buying with another person, discuss your income and debts. It’s important you both lay your (credit) cards on the table, as you’ll have to declare your full financial history to your lender.
Tech
Download a budgeting app (free versions are available) to help monitor your incomings and outgoings and alert you to any overspends.
Set up an automatic transfer so that the amount you intend to save every month goes straight into a separate account on the day you get paid.
Seek support
If there’s a chance the Bank of Mum and Dad could lend a hand, now’s the time to talk. Ensure everyone is clear as to whether the money is a gift or a loan so it doesn’t become a source of conflict later. Note: if the money you’re given is a loan, you’ll need to tell your lender.
Also, explore the option of living with a friend or family member to reduce or eliminate your rental bill whilst you’re saving.
Savings account
When choosing an account for your deposit, shop around for the best deal. ISAs can be a great option because you don’t pay tax on the interest you earn.
Another product to consider is a Lifetime ISA; they’re tax efficient, and the government gives you a top-up of cash depending on how much you save. But be warned, with Lifetime ISAs, you face a hefty penalty if you withdraw the money for any purpose other than buying a home or retiring *.
Looking to take your first steps onto the property ladder? Contact us here at Spencer Harvey today.
* Terms and conditions apply. Always read the fine print carefully before you commit.
