publication date: Jan 12, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
2010 – The Year of Saving for a Deposit!
Its official, you CAN save for a deposit and you CAN afford a home – if it’s what you really want! It’s funny that we consider the time since the millennium as the ONLY time when first time buyers can’t afford to buy a home. Especially as when I first bought in 1991, I couldn’t afford a property on my own and had to buy with a friend and only 50 years ago, only approximately one third of the country was lucky enough to be a homeowner!
Stage one: Work out how much you spend each month
Many of us don’t really track exactly what we spend, so it’s worth creating an excel spreadsheet (or sign up for access to our free excel spreadsheet which will do most of the work for you!). It’s essential to find where your money goes. When we did this with potential first time buyers, we found people spending £50-£60 a MONTH on just teas and coffees at the likes of Starbucks or Costa Coffee.
Stage two: Look at what you can cut out for the next year or two
The last 10 years has given us a false expectation that we can have what we want when we want. Well that has come to an abrupt end! It doesn’t mean though that we can’t have what we want, we just have to cut a few things out of our lives in the short term to get it.
For example, I drink tea all day everyday – about 17 cups! I used to buy them when I was out and on the road, but when the costs went up from around £1 to £1.59 – or more, I felt for a 2p teabag, a cup and a bit of hot water, this was not how I wanted to spend my money, so I take a flask on the road and reckon this saves me around £30 per month.
Think too about whether you really need to upgrade your car or whether you can find a cheaper holiday this year or not – the UK is a great place to be and days out around where you live, or visits to Ireland, Scotland or Wales can be fab. OK we don’t have the best of sunshine, but we do have fantastic countryside, historic buildings and some of the most amazing coastal walks that exist worldwide. Take time to enjoy it! And if I haven’t convinced you, get a late deal to Spain and have the sun and fun you need at a bargain price instead.
If you can, think of moving back home for a year or moving in with a friend who might be struggling to pay their mortgage, or a good quality room to rent (visit: PPP rooms) and save as much as you can on your housing costs so you can put more towards your deposit.
Stage three: Check what savings you have – are you maximising their returns?
It might be you have some money put aside and it’s important you make sure they are in the best savings plan you can, especially while interest rates are low. Using your ISA allowance is essential as you will save on paying tax on any interest you earn. Look for savings returns on accounts where they offer better rates for putting the money away for long periods of time. Check Which? Best Buys and the Saturday/Sunday papers.
Another tip is to find a good building society that offers 5-10% deposit mortgages for its own savers. The papers are now saying that most mortgages are being given to people that can prove they can save and manage their money well, so look for local building societies such as the Nottingham Building Society.
Stage four: Don’t blow it!
It’s easy to think that by saving a few thousand pounds it doesn’t make a big difference, but over three years that’s six thousand pounds – enough to get you well on your way to buying a new home. Keep going, it’ll be worth it in the end.
Stage five: Work out the Best Deals
The first house might not be your dream home or in the area you ideally want to live. But most of our parents and grandparents didn’t start off in the homes they have now, they took several times to buy and sell to live where they wanted to.
New builds are now and for the next year or so good value for money and for serious buyers will also help you with things that are stopping you from buying such as paying the stamp duty or even paying your deposit. You‘ll still need a few thousand for any ‘incidentals’ that happen to the home (even new homes have things that go wrong) or to help pay the mortgage if you get sick or have any problems work wise.
Some people who are selling their home may even be able to help out, accepting a lower deposit at exchange stage and you may have a family member keen to invest in property that may buy a half or a quarter of a property with you that helps you ‘get on the ladder’. You‘ll need to have a good contract in place (call us for help) so that if either of you want to sell you can.
Think you can’t save for a deposit or that you’ll never be able to afford a home of your own? Then challenge us to help you! If we can find a way to help you we will.
Contact us via firstname.lastname@example.org or 0845 838 1763 if you need help saving for your first home!