Saving for a home is possibly one of the biggest challenges you will face. It is achievable if you have a plan (which generally includes a budget), some luck, and a bit of kindness to yourself. This could take a bit of time.
The very first thing to do is take a hard look at your finances. Sounds simple, but a lot of us bury our heads in the sand, or skim over the tough stuff, and just imagine it’ll work itself out. The best thing you can do to get your savings started is lay everything bare, look at what you’re working with, and have a clear understanding of what is going on. If you are buying with your partner, or any other individual, have an open conversation with them so you can understand their finances too. It may be a tough conversation, but it will serve you well knowing everything now rather than later.
Once you know where you stand, you need to look at where you’re going, and how much you will need to save. What is achievable? You don’t want to set yourself up to fail by setting unrealistic savings goals. Though you may have a number in your head of the price of your ideal home, will you be able to get a mortgage for that much? Most mortgage lenders allow you to borrow up to four and a half times your household income. This may give you a ballpark idea of what you could potentially afford, and therefore how much of a deposit you need to save.
Every person is different, so saving goals can differ vastly. For some, you can move in with your parents and save money on rent, for others that is not an option, and you may need to look at cutting other expenses where possible or looking at how to create additional income. Are there any monthly subscriptions you haven’t used in the last six months - gyms, meal subscriptions, now tv, that you could save a bit of money on without missing out? We have some other great articles on saving here and here, but some simple saving tips that may help are:
Apply ratios to your income. A typical one used to be 50% towards your home expenses, 30% towards fun and lifestyle, and 20% for savings. This isn’t always practical now. However, making the decision to always pay a portion of your salary into savings will help set a good monetary habit and over time build a good savings fund.
Review your bills. Beyond your housing expenses, take a hard look at all of your monthly expenses including your mobile, internet, gym membership, car payments, and insurance. Is there anything you can cut or can you find a better deal? If you can save a few pounds off each of these each month, it adds up over the course of a year.
Look into cashback offers. You can earn money back for purchases you’d be making anyway (like groceries!). Look at legitimate websites or even your bank's rewards system.
Have a good sort out and sell some bits (clothes, handbags, games, etc). Not only does this mean less clutter to pack and move, but it also boosts your savings.
Your credit score is also something to consider (the higher your score, the better you look to potential lenders). Your credit score is vitally important in being able to get a mortgage and what rate you get it at. You can easily check your credit score for free with apps like Clearscore or Experian to see what your score is now. If you’re looking to improve your credit score, try the following:
Pay your bills on time.
Make sure you are registered on the electoral roll. It sounds odd, but having proof of your current address helps to boost your score.
Consider taking out a credit card. But don’t use this as an excuse to overdo it on retail therapy! Use it for purchases you know you have the money for and set up a direct debit to pay the money back in full.
If you are struggling with debt, speak to an organisation like StepChange. Not only will your credit begin to improve by getting a handle on your debt, but a weight will be lifted off your shoulders.
If saving is still proving difficult, or you don’t think you will be able to save for your house deposit (usually at least 10% of the purchase price), there are a number of incentives in place for first-time buyers to help you get that first foot on the ladder with a smaller deposit.
These incentives change, but as of February 2022 as a first-time buyer you have a few options.
Help to Buy is a popular choice, otherwise known as the Help to Buy Equity Loan. This is where you only need to save a 5% deposit, the Government will provide you with a loan of 20% towards the deposit, and then you can take out a mortgage for the other 75% (only available on houses up to a certain value, in the East Midlands, this is up to £261,900). The national asking price for a first-time property is said to be £200,692, meaning with this scheme you can be on the property ladder with savings of just over £10,000.
Jelson has a number of homes that are available in the East Midlands with the Help to Buy scheme. If you want to find out more about which of our properties can be bought through a buying scheme, chat to a member of our team today.