Saving a deposit for your first home
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.
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
- 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.
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!
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.
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!