Saving a deposit for your first home can be challenging, especially if you’re still a student or you’ve just started working. Here are some practical tips to help you step onto the property ladder.
From prioritising debt repayments, setting a goal and opening a dedicated savings account, there are steps you can take to help save a deposit for a home.
Setting a goal
Begin by researching property prices in the area that you plan to buy. Set a realistic budget for monthly mortgage repayments to help you figure out your savings target.
Budgeting
Look at your monthly spending habits to create a realistic budget. Cut down on non-essential expenses, but avoid restricting yourself too much. Consider buying second-hand or own-brand items to save money without sacrificing quality.
Prioritising paying off debt
Pay off any outstanding balances on loans or credit cards. Lenders consider your spending history when assessing mortgage applications.
Starting early
The larger your deposit, the lower the risk to lenders. You can make your deposit count if you start saving early. Try opening a dedicated savings account just for your deposit and other costs like stamp duty, moving expenses and legal fees.
Checking out government schemes
Did you know that several government schemes can help you buy a home? These include:
Important steps when buying a home
Here are some basics to think about:
Saving for a deposit
How much cash can you afford to put down? As a guideline, around 5% of the price of your new home should make up your deposit. But the bigger your deposit, the better your chances of securing a mortgage with lower interest rates on your borrowed amount.
To find out more, read this guide on saving for a house.
Your credit rating
Your mortgage lender will use monitoring agencies like Experian, Equifax and TransUnion to review your credit rating. If you’ve got a good record of keeping on top of credit card or loan payments – and using your credit limits effectively – it could help with your mortgage approval.
Mortgage in principle
Applying for a mortgage in principle – a letter from a mortgage lender confirming you would (in principle) be approved for a mortgage – puts you at an advantage. It shows the seller you are serious about buying and have the means and approval from a lender to buy a home.
Applying for a mortgage
If you’ve found a home and your offer has been accepted, the mortgage application can move forward. It’s good to have an idea of the type of product you’re looking for, which is something a mortgage adviser can help you decide.
Conveyancing
Conveyancing is to do with the legal paperwork around buying a home – from carrying out searches to putting together contracts. Speak to an adviser about finding a trusted solicitor that provides conveyancing services.
Mortgage fees
There are a range of fees to take into account when you’re a first-time buyer or moving to a new mortgage lender.
- Application fee
You’ll usually have to pay to set up a new mortgage. It might also be called an ‘arrangement’, ‘product’ or ‘booking’ fee, and could be anything up to £2000. - Valuation fees
Lenders will conduct a valuation of the property to check whether it’s worth the amount you’re paying. Fees can be upwards of £150. - Surveyor’s fees
These cost around £250 and involve a surveyor inspecting the property to make sure there are no structural issues. - Solicitor’s legal fee
This fee covers the legal work to do with managing the transfer of your mortgage and conveyancing, and local searches to check for planning issues. Legal fees can range from £850 to around £1500, and searches could be around £250 to £300.
Here we’ve covered just some of the costs and other issues to think about if you want to buy your first home. Starting early and setting savings goals can help you on your journey, along with knowing what to expect when the time comes.
As with all important decisions relating to money, it’s often a good idea to speak to a professional adviser who can talk you through the process.
If you want to learn more before getting advice, check out this guide to buying your first home.
Please note that your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.