Saving a deposit for your first home


Saving a deposit for your first home

Saving a deposit

This post was originally posted on First Home News, which is supported by Keepmoat. Keepmoat is a national market leader in sustainable community regeneration, housing, and planned and responsive repairs to the UK housing industry.

 

Saving a deposit for your first home is tough. Unfortunately, the media doesn’t make it any easier with their “shocking” headlines:

“House prices: First-time buyers need to save for up to 30 YEARS to afford deposit” – The Mirror (19 June 2013)

I have some good news and some bad news. The bad news is that saving a deposit is not easy. Luckily, the good news is that it is not nearly as hard as the media suggests.

 

Help is at hand

Thanks to the government’s “Help to Buy” scheme, first time buyers (assuming suitable affordability) only require a 5% deposit to get onto the housing ladder.

According to the Office of National Statistics, the average house price for a first time buyer in 2013 is £184,000. We therefore need to save £9,200 for our deposit. As the buyer, we will also need to pay a 1% stamp duty on a property of this value, adding another £1,840, and approximately £1,000 for legal and other costs.

So, in total we need to save up around £12,000 to get on that ladder! This seems daunting, but hopefully it will be less daunting after we follow the 4 easy steps to save a deposit for a first home.

 

1) Cut your expenses

You may think you live on a shoestring. But then again, you spent £40 last night when you went out for dinner with your friends. Oh, and £30 in the pub last Friday. Oh, and £40 on those new shoes last week. Oh, and £80 on your partner’s birthday present last month. Oh, and…you get the picture!

The average person in the UK spends around £300 per month on food, £260 per month on leisure and £100 per month on tobacco and alcohol. For the next 2 years, you are going to have to cut back. Meet your friends at home rather than in the pub/restaurants. Make those old shoes last another few months. Give you partner free love for their birthday!

In other words, be frugal, and cut your expenditure in these three areas by one third. But, don’t fear. Frugal is the new cool.

Saving: £5,280

Effort: minimal

2) Earn additional income

With the rising cost of, well, quite frankly everything, it’s not going to be possible to find the full £12,000 through cutting expenses alone. Instead, you can earn additional income and there are a million ways to do so:

  • Earn a promotion or pay rise
  • Give private lessons/tuition
  • Babysit
  • Mow lawns
  • Wash cars
  • Write articles online
  • Take surveys
  • Sell your junk
  • Rent out your parking space
  • Advertise your car
  • Become a mystery shopper
  • Enter online competitions
  • Iron clothes for friends & family

The list goes on. With just a few extra hours work, you should be able to earn an extra £100 per month.

Saving:  £2,400

Effort: moderate

 

3) Save on rent

The average monthly rental in the UK for a two bedroom property is approximately £400 per person. Therefore, as humbling as it seems, moving back in with your parents for 6 months may be a wise decision.  I know, no one wants to move back in with their parents.  However, you need to remember this is just for a transition period before you achieve your dream to get on the property ladder. Trust me, it’ll be worth it!

Saving: £2,400

Effort: depends on your parents!

 

4) Don’t go for the average

The problem with the average is that it includes all those people buying a house because Daddy has given them the money, or they have benefitted from an inheritance, or they star in Made in Chelsea! Wherever you are in the UK, you should be able to find an adequate first time home for £150,000 or less.

Saving: £2,040

Effort: None

And voilà: 4 simple steps followed for 2 years and we have saved a £12,120 deposit for our first home.

Good luck and happy saving!

4 thoughts on “Saving a deposit for your first home

  1. It’s also wise to set aside a budget for after the move. I’m not even talking about substantial renovations, just basics needed if you’ve been in an apartment (eg. lawn mower, show shovels, garden hose/rake, outfitting a basic tool box, etc). In addition, even if you basically love the house and are prepared to spread any renovations over a period of time as the money is saved…there will likely be some immediate spending to do superficial improvements and repairs left by the previous owner. Make a realistic list of the urgent and non-urgent repairs and cosmetic updates and prioritize based on safety issues and budget availability. Painting in your preferred colours and updating light fixtures and faucets comes after repairing loose railings and rekeying or replacing door locks to ensure you aren’t visited by the previous owner or anyone they ever gave a key to. How old is the furnace, AC and water heater? Also, consider setting aside funds for any additional furniture you’ll require to fill all that new space – certainly not an immergency, but lots of new homeowners fall victim to needing everything to look ready for a magazine shoot immediately after moving in. Allocate an appropriate amount for any major appliances you’ll require. Some homes come with the appliances some without. If they are included, are they ancient or likely to last a good long while? What about window coverings? Attempting to do all the windows in a home at once can easily set you back a bundle. If you’re lucky you be able to reuse some things from your rental, but recognize this can be a major expense in a new place.

  2. It’s a good thing that blogging came to be. Based on blogger’s knowledge and often, experience, they are able to paint a clearer picture of things going on. Can you imagine if everybody had to rely on what the media has to say just like how it used to be back in the day?
    Jen @ Frugal Rules recently posted…Shout Out Saturday #46My Profile

  3. Great tips! I enjoyed your article and it was certainly food for thought. Getting the money you need for a deposit, stamp duty and legal costs is not easy. Having a real desire to get on the housing ladder and following the tips you have highlighted above give first time buyers the first steps towards owning their own homes.

    Remember though buying the home is just the first step. Insurance, mortgage payments, repairs, council tax and utility bills all eat up your pay check! My advice is be prepared to continue with the frugal life style for a little while longer!
    Ross @ Sayvrs.com recently posted…Romantic Gifts for Your Partner on a BudgetMy Profile

  4. Pingback: How to secure a mortgage as a First Time Buyer

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