So you want to buy a house, but first of all you need to tackle that mammoth task of saving for a deposit. Before the recession, you could get a mortgage with £0 deposit. Anyone and everyone could buy a house, near enough. But post-recession, banks and building societies became hugely cautious, and suddenly you needed a 10% deposit. On a £100,000 house, that's £10,000! I don't know about you, but I've never seen that amount of money in my life.
When we chose to buy our house, there was only one building society offering a 5% deposit - this came at the cost of huge interest rates, but we took it anyway. Nowadays there is the Help to Buy scheme, and many more banks are offering 5% deposits without the large interest rates. That's 50% less to save than it was a couple of years ago. So now really is the time to buy. House prices are also on the up, so if you don't want to increase the deposit you need any more, then buy whilst house prices are still relatively low.
How did we save? With great difficulty to be honest. We were already renting - something I never wanted to do - but due to circumstances, had to take the leap to rent. Renting eats your money and essentially you're just paying for someone else's mortgage! The first point to note is that we chose to rent the cheapest house in our town. A kitchen is a kitchen, if you don't own it, it doesn't need to be nice.. it's only temporary. So that was already our biggest save. From day 1 of renting I decided I didn't want to be renting for any more than a year. That gave us the target of one year to build up a deposit. We made it our absolute priority for that year. I took on two jobs, working 7 days a week, and around 40+hours a week. We had £0 luxury spending money, no clothes, no games, no going out. We were in hardcore saving mode. This is obviously a little OTT, but had we not done this - it would only have taken double the amount of time, and I was desperate to not waste any money whatsoever.
It's important to remember, you must save for more than just a deposit.. My advice: Save at least 30% more than you think you need. So here's some ideas on saving for a deposit:
- If you have to rent first - keep it cheap. This will help you save in the long run.
- If you do need to rent - think about the possibility of sharing with someone, especially if there's an extra room going empty.
- Set an achievable time limit, this will help you to stay on track and allow you to work out how much you should be saving each month. But be realistic.
- Research the housing market in your area so you have a rough idea of how much money you need.
- Be realistic, your first home is not going to be your forever home. Do you really need those 3 bedrooms you long for?
- Find areas where you can cut costs in order to save more. Maybe switch energy providers? Ditch the TV subscription? - Remember getting rid of those luxuries wont be forever!
- Biggest place to save for us - Food Bill. Eat like students. Make batches and freeze them. Don't buy branded foods. Be creative - We used to substitute cheap sausages cut up for diced chicken or beef in everything and anything.. Curries, Fajitas.. You name it.
- When you reach set goals - maybe each 20% you save, reward yourself. Go out, party hard, buy those new shoes, whatever you want. Make saving fun.
Finally, remember the extras you need to take into account..
- Solicitors fees - these don't come cheap. Go for a 'no sale, no fee' to save you money in-case you have to pull out of a sale.
- Mortgages - some have a 'product' cost.
- Surveys and any insurance your lender may request - ie chancel insurance, damp surveys etc.
- Removal fees
- Cost of essentials in your new home: Fridge, Washing Machine, Pots, Pans, Glassware etc.
- Your first food shop will be more expensive than you think - especially if you've never lived away from home.
- Upfront bills for the year - Water, TV License, Phone installation.
- Car insurance costs may rise. Check with your insurer.
- First mortgage payment is almost always more expensive than the rest. Sometimes it can be double.
The last thing you want is to do is be in a tricky financial situation during purchasing your first home. Plan and prepare.