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The Best Ways to Save for Your First Home

With property prices higher than ever, even in the midst of a pandemic, saving enough for a house deposit could feel like a lost cause. But don’t despair – all you need to do is set realistic expectations and time frames. Establish good saving habits as early as possible so that if you really need to buckle down to meet your goals, you’ll already know what to do.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Money matters

How much can you borrow?

At the top of the list of what factors into how much you can borrow is your income. As a rough estimate, multiply your income (or yours and anyone else you’re buying with) by four and this will give you an idea of how much you might be able to borrow.

How much do you need to save?

With low deposit mortgages gaining favour again, the minimum you’ll need to save for a house deposit is 5% of the property value.

The new government-backed mortgage guarantee scheme helps first-time buyers or current homeowners secure a mortgage that covers 95% of the property price (up to £600,000.) 

In order to figure out how much of a deposit you’ll need to save, you need to work out what kind of property you’re looking for and what your price range will be. Of course, the more you can put down, the better rates and deals that will be available to you.

Long-term plans

Once you know how much you need to save, you can work out how long it will take to get there.

Working towards a 5% deposit and assuming you can borrow four times your annual salary, this means you’ll need to save roughly a quarter of your annual salary to cover the 5% needed. 

The rate at which you save will dictate how long it will take. If you can afford to save aggressively, it won’t take as long to hit your goal, but if you can only afford a small fraction of your salary, it might take years.

Set realistic timeline goals for yourself and don’t overestimate how frugal you can actually be, otherwise you might need to dip into your savings and delay reaching your goal.

Speed up your savings

Even if you can only afford a small amount each month, consistently putting away the same amount will ensure you progress towards your goal, slowly but surely. Review your monthly budget regularly and cut back on spending whenever you can.

Take advantage of government programmes to give your savings a boost. For example, a Lifetime Individual Savings Account (LISA) can help you save up to £4,000 a year, with a 25% bonus from the government in order to help you buy a property, if eligible.

Ready for your first home?

We can help ensure you achieve your financial goals – including becoming a homeowner. It’s important to talk to an expert to review the options available to you once you’ve reached your deposit goal. Get in touch with us to start your mortgage hunt today.

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