Buying your first home is an exciting step for your future. Things haven’t been made easy for first-time homeowners in recent years, thanks to rising house prices and the lingering effects of the world economic crisis – but that doesn’t mean that you can’t get yourself on the property ladder.
Saving for a deposit is perhaps the most painstaking part of buying a home, and between your current living costs and lifestyle, you might find that you don’t have much money left over to add to your savings at the end of the month. It might feel like your first home will be permanently out of reach, but that doesn’t have to be the case.
Take a look at the following tips to help you save money to buy your first home.
Work out what you can afford
The first step towards saving for your first home is to set yourself a target, something which can only be done when you know what sort of home you’re looking to buy. Things that will determine the price of your future home include the size of the property and the neighborhood, while how much you can borrow will be determined by your deposit size, your earnings and whether you’re buying a property alone or with someone else. You’re likely to be aiming for around a 20% down payment, although some mortgage lenders might be able to offer you a higher loan amount with a smaller down payment. It’s a good idea here to look at the different types of mortgages available so you know what you can apply for and what lump sum payment you will need, as well as typical interest rates and repayment terms.
To help you establish what you’ll be paying a month for a mortgage, it’s worth using a house loan calculator. This will help you determine what you can afford to pay each month, and therefore what the price of the house will be. This can be a real wake up call as to what type of property you can afford to buy, and might lead to other considerations such as whether or not you should move to a different area or look to buy with another investor.
Make a plan
Now that you know how much you need to save, you can start making a plan for how you’re going to save for your home. Work out how much you can realistically afford to save each month so that you can set yourself a target for when to buy. Work out different scenarios for buying within the year, two years and so on to see what the most best option is.
Ask for help
Now is a good time to find out whether your parents or other relatives can help you with your down payment. While some families might have been saving for this, others might be in a position to offer a loan to help you buy your home sooner. The sooner you get on the property ladder, the quicker you’ll be able to pay off your mortgage.
Create a budget
Having a budget is one of the easiest ways to save money. To create a budget for the first time, you need to write down all of your outgoings and your income and get a clear picture of your finances. When you see everything written down in front of you, you’ll be surprised at what you actually spend your money on each month.
Now that you know exactly where your money goes, you can make some changes to help free up money to put into savings. Some savings will be easy, such as canceling or reducing gym memberships, while others, such as your clothes budget or the money you spend on nights out, might be more difficult. If you’re serious about saving money to buy a property, you’re going to have to make some sacrifices.
Look for savings on your household bills
You can free up some extra money for your savings by looking for ways to cut back on your household bills. Reducing your tariffs or switching providers could mean that you pay less for things like gas or electricity, giving you some instant savings to add to your down payment.
In addition to haggling with providers, you can also adopt a more thrifty attitude to spending. Aim to reduce your weekly grocery spend, eat out less and find ways of using less energy to bring your outgoings down. You can make savings easily if you’re willing to look at cheaper ways of doing things, and it will all be worth it when you get the keys to your first home.
Reduce your spending
Reducing your spending is one of the toughest parts of saving money. If you’re used to wild nights out on the town or have to buy the latest fashions, it can be difficult to give that up when you’re supposed to be saving.
Instead of depriving yourself completely, set yourself a shopping and entertainment budget. That way, you’ll still be able to enjoy the things you love, but with some more care given to your spending. It’s easy to save money on clothes by searching for discount codes, while there are some great alternatives to nights out that will cost less money but still make sure you have a good time with your friends. You may also want to consider searching for a more affordable rental property. The move will be a pain, but it’ll only be short-term, and if it means you can save faster, it’s worth it. This may give you a little more leeway for spending money on the luxuries above, too.
Get a high-interest savings account
A high-interest savings account is a must for saving for a home deposit. Putting your savings into a high-interest account will help them to grow quicker, allowing you to buy your dream home faster than you would in a standard savings account. It’s worth making an appointment with your bank to find out about the types of deals they can offer you to help you grow your savings.
Saving money for your first home is tough, but there are ways and means to make it less painful and make the process simpler. Finding extra money as you go along by making cutbacks, boosting your income and so on could help you save for that down payment quicker so that you can buy your new home. Perseverance is the key here, so keep your eye on the prize, and you’ll be a homeowner before you know it!
Save Some of Your Budget for Repairs
As well as saving for a deposit and decor, you also need to think about the coming years and the challenges you might face with your new home. Not all transitions into a new property are smooth sailing; there may be repairs and replacements involved to keep your home safe and structurally sound. This is why it’s important to set aside some of your budget for practical home improvements such as roof replacement, window renewals and gutter maintenance. There are so many different moving parts that go hand in hand with running a household, so it’s important to be prepared for any potential scenario in the future.