How to save for a deposit in 2014
Now that the Christmas binge is over, it’s time to sort out your finances. The bigger your deposit, the lower the interest rate you will have to pay.
Here are some top tips from consumer group the HomeOwners Alliance:
1. Set a target to save for
Start by getting a clear idea of how much your new home will cost:
- Check out the area you want to live in to get an idea of house prices and trends, and then remember to track it as prices are set to rise this year.
- Ask a mortgage broker what they will lend and how much you need to save for a deposit. If it’s a 90% mortgage then you know you’ll need to put up the remaining 10% in deposit. While you’re there ask the broker about upfront fees.
- Don’t forget to add on legal fees and stamp duty as well and you’ll have a total to aim for.
2. Start budgeting today
Now’s the hard part. It’s not a quick win and it involves sacrifice. But setting a budget and sticking to it is still one of the best ways to make sure you’re not spending more than you earn and to identify possible savings.
- Take the time to sit down and work out where your money is going. Prioritise what you really can’t do without and what you may be able to sacrifice for 6 months. How much would this save you?
- Look at your insurance policies and utility bills and use comparison websites to see if you can get them cheaper.
- Consider getting cash out at the start of the week and making it last, rather than using your cards.
- Treat your saving for a deposit like you would treat paying a bill. Set up a regular transfer or a standing order to your savings account.
- Savings rates are at miserly lows so make sure you scour the market for the best deals.
3. Stop renting
We all know the Catch-22: you can’t save for your own place because all your money goes into renting. If you want to break this cycle, chances are you’re going to have to compromise. Just 6-12 months of not renting and living on a budget could make a huge difference to your deposit. Here are some options:
- Move back with Mum and Dad
Assuming you didn’t have a big row over Christmas, if your parents have the space and live near you then you’re throwing money away not staying with them for a short time.
- Move in with friends
Perhaps you have a friend in a similar situation with a spare room.
- Shared houses
Getting a room in a shared house will be cheaper and give you the chance to save up.
4. Borrow from the bank of Mum & Dad
More and more people are relying on help from their parents to raise a deposit. And there are also options for those parents who want to help but don’t want to hand over their savings.
5. Look into Government schemes
Over the last few years the government has launched several schemes aimed at helping people buy a home. The Help to Buy scheme allows you to buy new and previously loved properties with just a 5% deposit. Other schemes allow you to buy a share in a new build property and pay subsidised rent on the rest. It’s worth looking into.
The HomeOwners Alliance: we’re on your side
For more information on these tips, more free unbiased advice and quality tools and services visit the HomeOwners Alliance at www.hoa.org.uk or call us on 0330 088 2050.