Real Ways To Save A Deposit On Your First Home
Owning a home of our own is something many of us dream of, and planning a family puts even more of a focus on having a space that we have complete control over.
But with spiraling property costs, rising rents, the impact of the gig economy and the increasing cost of living, it’s a dream that can often seem very far away. With rental costs in most global urban centers equally as high – sometimes higher – than the cost of a mortgage payment, building up the capital for a deposit to get you on the housing ladder is an uphill struggle. Getting there is not an easy journey by any means – but it is possible. With patience, perseverance, a little sacrifice and some out of the box thinking, that first move into property ownership could become a reality for you.
Stop Rental Costs
The most significant issue facing many would-be purchasers is the impossibility of saving up a deposit while paying out a massive chunk of monthly income in rent. It becomes a Catch-22 situation that isn’t merely a question of cutting back on takeaway coffees and expensive haircuts.
The only solution to this particular issue can mean drastic changes – you are going to need to find a way to cut your rent payments. That could mean several things. If you’re lucky enough to have close relatives that would consider letting you move in with them on a temporary basis for a small contribution, it will drastically cut the amount you’re paying out each month, giving you a vital opportunity to stack up savings. Be clear on arrangements from the outset – how much you will be paying and when, what you will do to help with other household costs and chores, how long you’re likely to be there. This is vital for keeping everyone concerned happy. If its parents you’re moving back in with, don’t be tempted to fall back into childhood patterns – act like an adult and contribute as best you can.
If that’s not an option for you, you could consider downsizing your current accommodation – if you have a flat, perhaps you can relocate to a cheaper room in a shared house, or see if any friends have room to let. Websites such as roombuddies.com let you search for people to live with. If you do live alone, equally you could consider finding a lodger. You will need to check arrangements beforehand with your landlord and read through your tenancy agreement to make sure that you don’t find yourself illegally subletting. Your landlord may be happy for you to find someone else to live in the property or they may insist on finding the other tenant themselves – either lowering your payment or agreeing to let you find another tenant in exchange for a higher combined rent payment. Downsizing doesn’t just mean lower rent payments – it can also save you money on heating, tax and other household bills, which all adds up over time.
Think about the circumstances you are in – if you have a long and costly commute, could you find anything closer to your workplace to save on fares or petrol?
Some cities also run ‘property guardian’ schemes, where by you get the chance to live in an empty building, keeping it secure and in good repair, in exchange for lower rents – the accommodation is even free in some cases. However, you may be asked to move at short notice, and not all opportunities are in easily accessible places.
Buying a Part-Share
Shared ownership schemes are becoming increasingly popular in line with the escalating unaffordability of property, but luckily lots of first-time buyers will be eligible for shared ownership schemes. Some of these are run by the authorities, while others are run by private developers. They involve buying a share in a property and renting back the rest.
Although this comes with various terms and conditions attached and means that you do not own 100% of your home, it’s the vital foot in the door that many need to own their own home. You will still need a deposit, but typically this reduces the amount to around a half to a third of what you would normally be paying, as your total mortgage amount would only be a fixed percentage of the properties’ actual value. Many offer initial interest-free terms, generally followed by a competitive rate.
There are a few downsides – you may only use certain lenders and aren’t free to shop around for the best mortgage deal, you will be limited to selected new build developments and there is a risk of falling into negative equity. But if your heart is set on that new Condominium by the seafront, then this could be a quicker way to achieve your goal.
Make Your Savings Pay
On top of cutting costs and finding ways to reduce the initial purchase price, you also need to ensure that the savings you are making are working the hardest that they can for you. Don’t just stick your money in any old savings account and hope for the best. Shop around for the best market rates and return on investment you can – this can drastically speed up how long you are saving for.
Unlike other consumer products, loyalty in the savings market is not generally rewarded, and a lot of places save their best rates for new customers, so don’t be afraid to shop around for savings accounts. Be aware that some accounts will offer an initial ‘bonus rate’ that then runs out after a set period. Make sure you understand what withdrawal conditions are attached, and think about when and where you may need access to these funds.
With a little clever money management and some very savvy shopping around, owning your own home doesn’t have to be so far out of reach. It may require some research and some short-term adjustments, but it can definitely be done – you just have to decide if its worth it to you.