Getting onto the property ladder for the first time is exciting. House deposits can be expensive, especially in this country. The increase in property prices has put off some first time buyers from getting onto the property ladder. However, we have some excellent tips to help you save your deposit quickly and efficiently.
How much is a deposit?
Mortgage lenders tend to request 5%-20% of the house you’re applying for. If you’re property values £200,000 you might be asked to put down anything between £20,000- £45,000. To get over this expensive hurdle, first time buyers can apply for 95% mortgages - Which allows buyers to put down 5% of the total price (£10,000). One concern is you could face higher interest on your loan. Ideally, putting down a 20% deposit will give you a better rate on your mortgage.
The first point of call is to begin saving straight away. By putting a sum of money into a savings account at the end of each month you can build up your deposit.
It’s more effective if you’re buying a home with a partner or friend. If you both transfer money into individual ISA accounts at the end of each month, you’ll speed up the moving in process by earning interest on top of your savings.
If the mortgage lenders find that you have unpaid credit cards and a history of not paying off direct debits on time, this could make you less eligible for a mortgage. Henry Pryor – BBC’s Property Expert says, "Take care with paying bills on time and ensuring you meet your current commitments. New lending rules introduced in 2014 mean that lenders will look at your past as a way of deciding your future."
The Liberal Democrats and Boris Johnson are adamant to enlarge the Rent-to-Buy scheme. The scheme allows first time buyers to rent a newly built property at 20% below the market price for up to five years. During your tenancy you will be paying less rent which gives you the opportunity to save towards your deposit. At the end of the tenancy, you will have the option to buy part of the house on a shared ownership agreement or leave the property.
Samantha Ashdown - Owner and Co-founder of Hometruths, shared some money saving tips for first time buyers, "Short term pain for long-term gain! Your savings need to increase faster than property prices are going up, so take on that second job, sell some clutter on eBay and go to the bank of mum and dad."
Help to Buy ISAs
Katie Faulkner, one of the UK’s leading Property Experts, said: “The Help to Buy ISA offering 25% government support and many other initiatives for First Time Buyers, plus with many areas across the UK having property prices lower than they were in 2007, now is a great time to really check your finances and start saving for a deposit.” The Help to buy ISA Scheme launches autumn 2015, allowing first time buyers to receive a cash injection up to £3000 from the government. You can save up to £200 a month followed by the government adding 25% on top (£50).
To be eligible for the Help to Buy ISA, you need a minimum of £1600 saved in your account. These accounts will be available from most banks and building societies from autumn 2015.