Saving for your first home can be a huge challenge. Having a savings plan can help make life easier and get you moving quicker. If you are aiming to save for a deposit, here are our top tips to building a savings pot.
Find out how much you really need to save for a deposit
Most first-time buyers put an average of 20% deposit down on their first home. But this is only the start of your savings journey to get you on the property ladder.
Working out a realistic figure of what you need to save for your first house can help you avoid any unexpected costs. There are many other costs involved in buying your first home which can easily trip you up.
Most mortgage lenders have online calculators to give you an indication of the amount you can borrow, what deposit you will need and what your monthly repayments would typically be. Remember, these are for illustrative purposes only and are not likely to give you exact figures.
You will then have to cover other fees and costs along the way, such as:
- survey costs
- solicitor’s fees
- mortgage arrangement fees
- valuation fees
- building insurance
- decorating, furniture and all the essentials
- stamp duty
Remember, the bigger your deposit you have, the less you will need to borrow.
Set a timeframe for savings and put what you can away each month
Working out how much to save for your first home is only half the battle. You now need to draw up a plan of how you save, setting timeline targets along the way. How long it will take depends on how much you can afford to put away each month.
Regular saving is much more effective than trying to put away bigger lump sums at less regular intervals. Keep it realistic, but equally look at where you can cut down on luxuries to help you get there quicker.
Cut down on unnecessary expenditure
Make a list of your monthly income (not forgetting bonuses) and compare it to your outgoings.
Go in to as much detail as you can with this, as it will help draw a picture of where you can start to immediately cut spending. Start by listing your regular expenses such as bills, groceries and travel.
Most importantly, make a list of your luxuries and add up what you have spent recently – how many coffees have you bought on your way to work in the past six months? How many times have you eaten out?
If you spend £2.50 on a coffee on your daily commute, that could be costing you around £650 a year!
Your expenditure list will help you make a few small lifestyle changes that will help to save that little bit extra. Swapping to supermarket own-brand items and buying fresh foods are other ways to free up more money for your savings pot.
Optimise your savings potential
Take a look around the market for the best savings accounts. ISAs help you save free of tax up to the allowance, with some better than others. It is best to shop around and check the interest rates to find one that will give you better savings growth.
Take a look at price comparison sites to find a savings account that’s tailored to you.