Saving for a deposit for a home is no mean feat. But you don't need to swear off all worldly pleasures to get there. So how can you get started?
First up, you need to work out the type of property you’re interested in and how much you’re prepared to spend.
Are some areas cheaper than others for two-bedroom flats? Could it be worth looking a little bit further out to get more space for your money?
You can research house prices in your chosen area and find out what homes have actually sold for. Or, just nosey on the neighbours. Who knew number eight were so flush?
Once you know your budget, you’ve got a goal to work towards.
How can I start saving for a deposit?
1. Set a realistic target
Work out how much you can afford to save each month. Then transfer it into a savings account the minute you've been paid, so you're not tempted to spend it.
To secure a mortgage, you’ll ideally need to save around 10% of the property price.
So, for a home with a price tag of £200,000, you’ll need to save £20,000.
2. Reduce your rent as much as possible
Could you move back in with your parents or take a room in a house or flat share?
Your rent is likely to be your biggest outgoing. If you can put it in the bank, it will go a long way towards your deposit.
3. Take out a Lifetime ISA
It's a saving scheme with benefits. The government tops it up by 25%, so if you can chip in £4,000 a year, they'll add an extra £1,000, for free!
You need to be between 18 and 39 to apply but you can keep stashing that cash away until you’re 50.
There are certain conditions attached, like the home you're buying mustn't cost more than £450,000. And it must be mortgaged. You can find out more about the Lifetime ISA here.
Otherwise, using an ISA or regular savings account is a good idea, as they offer higher rates of interest than regular current accounts.
4. Cut down on other spending
Keep social events as cheap as possible. Picnics in parks with homemade sandwiches are your new gourmet of choice.
Cancel that gym membership, running is free.
Resist the latest fashion trends. New clothes are nice. They can wait.
Buy a place with a mate. Instantly halves the deposit needed, so that's half the job done.
Ignore the media hype about sacrificing avocado on toast to achieve your dream. You’d need to give up around 20,000 avocados in order to save a deposit of £20,000.
5. Ask the bank of mum and dad
First-time buyers are increasingly reliant on the bank of mum and dad to give or lend them the money for a deposit.
In fact, parents are now the UK’s 9th biggest mortgage lender, according to the Mortgage Advice Bureau.
Do make sure you’re clear about whether their help is going to be a gift or a loan. And how you’re going to pay it back if it’s the latter.
Working out the details now will help to prevent any issues cropping up further down the line.
6. Use a budgeting app
There are now some nifty budgeting apps to help you manage your savings. And some show you where you could be saving even more to achieve your personalised targets.
Apps such as Moneybox, for example, nudge you to ‘round up’ online transactions to the nearest pound, and save the change. And app-based banks such as Monzo and Starling let you set spending limits.
7. Consider a government buying scheme
Rising house price rises are making it harder for first-time buyers to get their deposits together. So it's worth looking at some of the government schemes on offer.
Shared Ownership is a popular scheme, as it helps people on low incomes buy a home through purchasing a stake in a property and renting the rest.
There's also the mortgage guarantee scheme, First Homes and the Help to Buy Equity Loan.
Which first time buyer scheme is right for you?
8. Can I get a 100% mortgage?
Since the financial crash in 2007, it’s become almost impossible to secure a 100% mortgage. However, there are ‘family offset’ or ‘guarantor’ mortgages available.
Guarantor mortgages are where a parent or relative offers their savings or property as security, so you can borrow 100% of a home’s value.
But if you default on your loan, those good-hearted folks will need to make up the shortfall, so it’s not an arrangement anyone should enter into lightly.
Sit down together, talk it through properly and get independent legal advice first.