Tips to Save for a House Deposit
If you are looking to buy a house, but you feel that you don’t have enough of a deposit yet, do not feel alone. Thousands of people across the UK are in the exact same situation, thankfully there are a few ways that can make your experience better in finding a home.
Saving for a Deposit
A mortgage deposit is a lump sum amount of money that gets paid upfront when buying a house. Usually, a deposit is 5%-10% of the property's value. The bigger the deposit, the smaller the mortgage you’ll need to take out to pay for the rest of the house.
How to save
This is an issue that most people struggle with, but there are a few tips and tricks that can help you save your money in a quicker way.
You will have heard this one a million times before… Slash your spending. Most people spend massive amounts of money on things they could go without. If you are committed to buying a home, ensure you are doing everything possible to save for that deposit.
Try out these top tips:
Price Comparison websites - There are loads of price comparison websites that can help you save money on a multitude of things. Insurance, utility bills, even your weekly shop. Try and be savvy and cut out excess where you can.
Saving/Budgeting apps - Apps such as Yolt or Plum can really help in saving money with minimal effort. Often these apps will round up your spending to the nearest pound and deposit the difference into a savings account.
Save in the right places
Well done saving money! But you need to make sure you are saving it in the right places. Popping savings into a Lifetime ISA is an excellent way to boost your savings, and make sure your money is working for you.
Lifetime ISA’s allow you to grow your funds for your first house with ease. The government will add a 25% bonus to your savings, up to a maximum of £1000 a year. There are a few rules that surround the ISA, such as the money can only be withdrawn to purchase your first house, if you are over 60, or if you are terminally ill.
Help to buy
The Help to Buy Equity Loan scheme allows potential homeowners to purchase a house with a 5% deposit if they're first-time buyers. There are slightly different rules across the UK on how the scheme can help, the following details refer to the Equity loan Schemes for England and Greater London.
The government will lend you up to 20% of the cost of your new home. In London, you can be lent up to 40%.
You need to save a minimum of 5% for the deposit. Money that you have saved in your Help to Buy ISA or Lifetime ISA can be used here. The remaining amount comes from a specialist Help to Buy mortgage product. The equity loan is interest-free for the first five years.
When applying for a mortgage, the lender will have to take into consideration your credit score, to understand how trustworthy you are to pay back the amount lent. This can affect how much you are lent, and how much interest to charge you.
Improving your credit score will increase your chances of having your application accepted. The lender needs to know that you will be able to afford to pay the sum back.
So, check your credit scores with one of the three main credit agencies that hold reports on you. These are TransUnion, Equifax, and Experian.
If your credit score is low, make sure that you take steps to improve it.
If you are looking to buy a home, our team will be happy to assist.
You can get in touch here.