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 Torbay . 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 £234k, 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 £2.75 takeaway coffee every working day, that works out at £55 a month or a whopping £3,300 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 a lot 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 basically something they do in their spare time for a little extra cash. Side hustles are often something that’s 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, evening bar work, or anything that fits in with your work schedule.
3. Ask for family help
Around 23% of first-time buyers admit that they got help from their parents for their deposit. If you 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 do offer 100% mortgages that are secured against your parent’s home. However, it’s important that you all 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 (if anything), 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. You certainly wouldn’t be alone, last year over 300,000 people moved out of London, many of them families with young children, while cities such as Bristol and Manchester saw influxes of ex-Londoners.
It can be difficult to leave a location you love, so think about the things you like most about it, then try and find similar aspects in a cheaper location.
6. Lock away your savings
When interest rates are low, 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 happy to live with potentially for years.
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 Ridgewater Sales and Lettings on 01803 525100 and we will be delighted to assist.