Long before you begin the process of applying for a mortgage and securing your perfect home, most first-time buyers will need to save for a deposit.
In fact, half of first-time buyers put 10% into a deposit according to the 2015 Which? national property survey. That 10% can be quite a hefty amount, so you may not be alone if you think you could be scrimping and saving for a long time.
If you do, don’t panic. With a bit of financial savviness and a few tweaks to your spending habits, there’s every chance you could save the required amount faster than you thought.
Here are our practical tips on how you might be able to keep your piggy bank well fed without having to live on the breadline.
Before you start, work out the size of the deposit you intend to save – are you going to stick with 5% of the property value or be a little more ambitious and aim for 10% or more?
Make a note of everything you spend over the space of a few months, as well as expenditure on things such as insurance, bills, clothing and holidays. Downloading a savings app to your smartphone can be a great way to keep track.
An app can allow you to spot bad or frivolous spending habits, which you then have the choice to cut out, thus saving money. Set yourself a goal of ‘X’ amount every month, be brutal and stick to it!
Our Saveapp is only currently available on iPhone but we hope to develop it for other platforms in the future. If you have the right device, why not find out more about Saveapp.
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It goes without saying that cutting out cigarettes, alcohol and coffee can be easier said than done, but giving up these vices can give your savings a boost.
Review your household bills and see if money can be made by switching providers for energy and internet, and even consider living somewhere cheaper. If you have a satellite TV package of some sort, ask yourself if you really need 1,000 plus channels when you only watch three.
Whilst the thought of staying locked indoors for the amount of time it can take to gather your deposit is a bleak extreme that few would manage, at least cutting down on trips to restaurants and bars will help you reach your goal sooner rather than later.
Many of us hoard items like DVDs and books without even realising, and whether it’s an extensive CD collection gathering dust, or some designer clothes you’ve worn once many moons ago, ask yourself – do you really need it?
Whilst you’re unlikely to get rich selling your unwanted clutter at a car boot sale or on selling website, when you put it all together, it may work out to be a nice little earner. Just don’t be tempted to go on a spending spree whilst you’re at it!
Paying less rent could be a good way to free up more cash for your deposit. You could reduce your rent by downsizing, how many bedrooms do you really need? Or you could relocate to a cheaper area closer to work so you can save on commuting costs. A house share is often cheaper than living on your own, or you might want to look for a lodger, who knows you might enjoy the company.
You could keep your deposit under the mattress, or you could get smart and squirrel it away in a decent savings account. Some will offer you a higher rate of interest if you commit to locking the money away for a year or more, and then there is always the option to utilise your annual ISA allowance. Learn more about first direct savings accounts.
Make sure you read all the small print to uncover any charges or restrictions attached to the account. So, whilst you may have to tweak your lifestyle, if you’re desperate to get onto the property ladder and you don’t have much in the way of savings, the effort should be more than worth it once you’ve been handed the keys to your first home.
The material contained in this document is for information purposes only and does not constitute advice. You should obtain relevant legal or other advice if you are unsure about the effect on you of any matter in this document.