With the average first-time buyer deposit sitting around the 25% mark, getting on the property ladder as suddenly become more difficult again. The heady days of 100% mortgages have come to a skidding halt and you suddenly find yourself needing at least £30k in the bank to even get a piece of the ‘falling’ house prices. So how do you go about building a deposit?
1. Spend less, save more!
OK, so this is going to take a while but you have to start somewhere. It is surprising how much spending is surplus when you scrutinise it. Are you renting? Could you rent somewhere cheaper for a while? How much would that save you in a year? That’s just one example, but when you look at your spending activity, really try to think about what you could rein in on without making yourself too miserable. Even tricks like taking a set amount of cash out with you for your nights out and NOT taking your card (we’ve all done the £50 withdrawal at the end of the evening!) could save you a surprising amount each weekend.
2. Put your savings where it counts.
Apathy is a main reason banks keep their customers; the perceived hassle of moving banks puts us off! Have a look around for the best savings interest rates and follow the deals to make your cash grow faster.
3. Have you got other savings?
It might be that you have ring-fenced your savings for different things. If you have a pool of savings outside of your deposit, consider the money you will save by getting a better interest rate on your mortgage against any returns you are currently getting on your cash in a savings account.
4. Consider relatives
It’s never easy to ask for help, and particularly difficult to ask for money. However, the only way many people get a foot on the first rung of the property ladder is to ask their parents for a loan. Make sure you have agreed a time period by which you will pay them back and have set amounts as to what this will be each month. This will help avoid any uncomfortable conversations that may arise from either party. You can offer to pay them back with interest, but remember this could be considered as an income to the lending party and could be open to taxation!
5. Get a bank loan
This is a tricky one as effectively you are opening yourself up to more debt. However, if you do the maths carefully enough and find that there is an advantage to getting a loan to boost your deposit AND that you can pay back the loan and mortgage repayments together, then go for it.
6. Look outside the box
There are some housing foundations that are set up to help first-time buyers into the market. These may revolve around part-ownership or government-assisted mortgages with the opportunity to buy the property in full at a later date for example. Have a look around in your area to see if any schemes exist, you may be pleasantly surprised.