A Detailed Guide on How to Save For Your First Home
By Harrison Jones
Ascending the real estate elevator has become challenging in the past few years. However, with some guidelines and knowledge of what you should do, you can soon have your name down on a title deed, showing you own a house. But first, you must know how to save up for that first house. This post shows you exactly that.
How Much Must You Save for the House You Want?
Everyone has different objectives and preferences for a house that we have to consider. A young single adult, for example, may want to save for a one-bedroom flat in the centre of a city. On the other hand, a young couple may want to save for a semi-detached house in the countryside.
Therefore, beginning your research and learning about the costs of houses and apartments in your desired area is critical. You can achieve this by searching online and viewing the asking prices of residential properties in the area where you want to buy. You can employ the aid of a realtor. They’ll earn a commission if you buy from them, and they’ll gladly help you.
After that, you can determine whether you can save enough for a 5% or 10% down payment on a home. Of course, saving for a 5% deposit is more attainable, but if you can hold out and save for a 10% deposit, you have a better chance of being approved for a mortgage or getting a better rate.
If you need help, you can get some of the best quick personal loans from digital lending institutions. You can sign up and get money instantly at the lender’s most convenient time.
It’s crucial to remember that buying a house involves more than just a deposit when deciding how much to put down. Your deposit should account for all potential costs, including administrative, legal, valuation, and conveyancing fees.
Tips on Saving Money to Buy Your First Home
Come Up With a Savings Goal and a Deadline.
Once you’ve determined your savings goal, take some time to sit down and calculate all of your income and expenses. This includes your partner’s income and costs if you have one. Following that, determine how much you will contribute to your house deposit each month, as well as an estimate of how long it will take you to reach this goal.
Save Your Spare Change.
When you make your first purchase, it’s simple to assume that a small contribution is insignificant and won’t change much. However, you’ll be astounded by how much it accumulates once you start setting it aside.
- Round off your purchases to the nearest pound or five pounds, then set the difference aside in your savings.
- Don’t use your spare change. Before depositing it into your savings account, keep it in a jar with a narrow neck. Alternatively, you can select a specific coin or note, such as £2 coins or £5 notes, and save it. Next, once the jar is full, you can open it, count your money, and take it to the bank.
Monitor Your Spending.
We often spend money without giving it much thought, so being more aware of your spending can help you as a first-time homebuyer to better manage it and start saving.
- Using cash instead of credit or debit cards makes it more uncomplicated to control your spending. You physically see the money you’re spending, so you’re likely to spend less.
- Consider the £5 challenge. As soon as you’ve paid your bills and other necessities, set a daily spending cap of £5. Any remaining funds should then be placed in your savings account.
- Look over your spending and cut back where you can. When it comes to necessities, since you cannot live without them, you can shop for the best prices on those items. There are apps you can use to track your spending if it’s difficult for you to track where your money goes.
Have the Intention to Save.
If you’re keen on saving money for your first home, you’ll discover that a bit of forethought can go a long way. You have to be intentional with your goal of saving.
- Design a reasonable monthly budget and stick to it. You can cite this budget in a spreadsheet, write it on the back of an envelope, or calculate it online using a budget calculator.
- You can also plan and prepare your meals a week ahead. Cooking at home instead of eating out can help you save money.
- Come up with a vision board if you need a visual reminder of your savings goal.
Increase Your Income.
There are many ways to increase your monthly income. For example, you can make a little extra money to help with a down payment on a house by working a weekend job, babysitting, gardening, or selling things you no longer need or want on Facebook Marketplace or eBay.
Save Your Money in the Right Place.
You can open a Lifetime ISA if you’re a first-time buyer between 18 and 50. The government then gives depositors a 25% bonus at the end of every year. Once you withdraw the funds to put a down payment on your first home, you can continue to save for retirement. The annual limit you can put into your Lifetime ISA is £4,000, but you can still contribute £16,000 more to other types of ISA, such as cash ISAs and stocks and shares ISAs.
Consider Getting a Help to Buy: Equity Loan.
If you’re a first-time buyer in England, you can apply for a government Help to Buy: Equity Loan to help you pay for a newly built home worth between £186,100 and £349,000. The amount varies depending on where you’re buying.
The program started last year and will last until 2023. However, new submissions have to be filed by October 31, 2022, at 6 pm. Borrowing amounts range from 5% to 20% of the cost of a new-build home or 40% if you’re purchasing in London. For the first five years, you are not required to pay any interest on the loan. After that, you’ll be charged a 1.75% interest rate.
When you realize how much of a deposit you need to save for your first home and wonder how to get your hands on the money, saving for a house deposit can seem as daunting as climbing Mount Everest. In addition, it can be challenging to know where to begin saving. However, if you take it one day at a time and just start, you’ll soon realize you’re closer to your dream home.
Harrison has been a freelance financial reporter for the past 6 years. He knows the major trends in the financial world. Jones’s experience and useful tips help people manage their budgets wisely.