Make the most of your earnings and take steps towards buying your first home.
The average UK house price has risen astronomically in the last couple of decades, from under £60,000 in the 1990s to over £230,000 in 2020.
For many people, financial independence can be expensive, making it difficult to save money with outgoings like rent, council tax and monthly food bills. But we’re here to tell you that planning for the future is possible.
Here are some actions you can take to make progress right away. By following these steps you can set yourself on a path towards owning your first home:
How much do I need for my deposit?
First of all, have a target in mind. Ideally, buyers should save as much as possible to put towards their first home. However, when trying to balance other outgoings such as rent and bills it’s important to be realistic. You will need 5-10% of the value of your desired property purchase so if your dream first home costs £200,000 you will need between £10,000-20,000 to get the ball rolling.
Will I get a mortgage right away?
Once you have your savings in place, the good news is that mortgage availability is increasing, particularly for first-time buyers. The number of mortgage products on the market is now at its highest level since before the pandemic. Many lenders are now offering highly competitive deals and interest rates are continuing to fall every month.
How should I budget for a deposit?
Set an amount to save each month that you know you can afford and can consistently add to your savings each time you receive your wages. This will help you stay focused and not become overwhelmed or disillusioned. A recognised way to organise your money is 50:30:20.
This refers to dividing your monthly salary into 3 sections; 50% for rent and bills, 30% for spending and 20% for saving. If you’re consistent with this approach over a prolonged period this can be a highly effective way to save and you will, slowly but surely, start to see progress in your financial situation.
Should I use an app to budget my money?
Using a budgeting app can help you understand your income and spending to have more control over your finances. Many apps can connect with your bank account and credit card accounts to give an overview of transactions and help you organise your budget.
According to Investopedia, the top budgeting apps available today include You Need a Budget, Mint, Simplifi by Quicken, Pocket Guard and Zeta.
Should I audit my bank account?
Once you’ve gotten to grips with your budget, take the time to put your banking under the microscope. Look out for forgotten payments; old subscriptions that you never got around to canceling or health club memberships that you never use - you might be surprised about what you find. £15 a month might not seem like a lot but over the course of a year it adds up to £180. Small changes can add up to a big difference.
What schemes are available for first-time buyers?
Equity Loan scheme or ‘Help to Buy’
Equity Loan scheme or ‘Help to Buy’ is great for first-time buyers looking to purchase a ‘new build’ home. Buyers need a 5% deposit and can borrow 20% (or up to 40% in London) of the sale price. Helpfully, you’re not required to pay interest on your equity loan for the first 5 years of residence. If you decide to repay any of your equity loan at any time, this must be at least 10% of what your home is worth at the time of repayment.
Head to our ‘Help to Buy’ section for more information.
Shared Ownership
Shared Ownership is another great option for those trying to get onto the property ladder. This is a Part Buy/Part Rent Government scheme that can make a huge difference to the mortgage rate you can receive on your way to owning a home.
Homes available with Shared Ownership are often new-build apartments or houses with between 25% and 75% available to buy. All Shared Ownership applicants are obliged to invest in the maximum share possible. This will be assessed via your income and savings which you’ll need to provide along with details of your monthly outgoings. There will also be costs such as legal fees to consider plus an ongoing rent to the shareholder of your property.
