How to save for a deposit
Saving for a deposit is a crucial part of being able to take that first step into buying your first property. There are many ways that you can save for a deposit, and a few simple changes in your lifestyle, alongside taking advantage of government incentives can undoubtedly help you to save for that deposit.
The greater the deposit you have, the lower your monthly payments will be. However, at the moment, the minimum deposit required to obtain a mortgage is between 10-15%, which means you will be borrowing between 85-90% of the purchase price from a lender.
If you are looking to purchase a property worth £200,000, you would need to at least save £20,000 for your deposit. You can visit our website and see a range of available properties for sale, to get an idea on price versus location www.seths.co.uk
The larger your deposit, the smaller your monthly mortgage amount will be, and you will also attract a lower interest rate from most lenders. Mortgage lenders will offer different rates of interest depending on the Loan-to-Value percentage, also known as LTV.
How much you will need to save will depend on your circumstances and the purchase price of your first property. However, if we take into account the average property price of a first-time buyer, alongside the average deposit of 15%, this would mean that you would need to save £33,000 on a £220,000 property purchase.
An excellent way to start to save for a deposit is to consider paying off existing debts and then decide on how much you can put aside each month. Paying off your existing debts such as loans and car payments will increase your affordability check with your lender. At the same time, if you can save a monthly amount, this will start building your deposit for your house.
Once your debts are paid, place the same monthly amount into your savings, as you are used to having this amount leave your bank account every month, allowing you to save much quicker for your ideal deposit.
Next, look at your monthly outgoings from your bank account and see what you can reduce. For every outgoing you reduce, place that same amount into your savings account. In many ways, your outgoings will remain the same, however, more of it will be going towards your savings, rather than general expenses.
Make sure you look at the market for the best savings account, at the moment, most banks offer very low-interest payments on any savings due to the Bank of England base rate being at an all-time low. However, there are still some bank accounts out there worth looking at.
Use apps such as Moneybox to keep track of your savings. This is a great way to make sure you are on your way to your ideal deposit. Some apps, will also give you notifications, reminding you to save more money into your savings account.
See what help is out there from the government too, take advantage of the Help to Buy scheme and the Lifetime ISA for example. You might find that family members may also be able to help you towards your savings goal.
Although the deposit for your purchase will be the main sum of money you will need to save, you will also need to keep in mind additional costs such as mortgage product & broker fees, conveyancing fees and stamp duty costs depending on your purchase price. However, with the recent stamp duty holiday announcement, this will only come into effect if you are purchasing a property above £500,000.
There are other costs to take into account, such as moving expenses and setting up your home with furniture and kitchen necessities, alongside TVs. So it might be worth working out all of these costs too and saving for them, so this way you will be able to cover all your expenses with ease.
If you are looking to purchase your first property and / or would like some advice, call our property experts today on 0116 266 9977, who will be more than happy to have an informal chat with you.