Saving a deposit for a house or flat can seem a daunting task, particularly with house prices continuing to rise.
The Government's Help to Buy scheme has definitely eased the strain on first-time buyers by increasing the amount of 95% loan-to-value (LTV) mortgages available, but even saving that 5% can require a lot of careful planning and self control. Here are some pointers to help you along the way.
Sit down and itemise all the money you've got coming in and going out. How much can you afford to save every month? Remember that your end goal is a challenging one so you'll probably need to set a fair proportion of your monthly income towards saving. This might mean restricting the amount you spend on nights out, or on luxuries. At any rate, be sure the amount you can commit to isn't unrealistic. It's going to take a long time to save – and that's a long time to feel stressed and miserable! From what you can comfortably save, work out how long it will take to get to the figure you need. For example, if the amount you are trying to save is £9,000 and you can afford to save £300 per month, then you're looking at about 30 months – or 2½ years. Don't be put off by how long it takes – as the Chinese philosopher Lao Tzu once said, "A journey of a thousand miles must begin with a single step".
Plus, you don't know what's around the corner. You could come into some money, get a salary increase or a bonus – all these things could bring your dream of home ownership a little closer.
When saving for your first home you're going to need a savings account that allows you to contribute regularly to it. Getting the best interest rate is key, and one way you can really help yourself is by saving into a cash ISA. Each year you have allowance of how much you can invest into an ISA. All interest you earn is tax-free, which means your savings are going to be working harder for you, and getting you to your end goal sooner.
You may also want to consider the Government-funded Help to Buy: ISA where you'll be given a 25% top-up on the amount you save, provided you put the funds towards your first home. In April 2017 the Lifetime ISA is also set to be launched that'll offer a similar format, so either option could be perfect for first-time buyers.
A regular savings account could also be a good option, giving you the kick start you need to reach your goals. But whatever savings account or cash ISA you go for make sure to regularly review the rate, particularly if you've got a variable rate deal. Some accounts have a rate that is partly made up of a bonus, but this will normally fall away after 12 months, reducing the amount of interest you receive thereafter.
House prices can change considerably, even in a relatively short space of time. You could face the frustration of getting all your money saved, only to find you haven't quite got enough to buy a property. You'll need to be patient – and flexible. Keep a regular check on house prices in your area and keep reviewing your savings plan. You might have to save more each month, or accept that it's going to take longer to achieve your goal. You might even consider compromising on the type of property or the area you want to buy in. Of course, this all assumes that house prices will continue to go up – there is the possibility of them levelling out or even coming down a touch. And if that happens, you could be in a position to buy a little earlier than you expect!
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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