Saving for a deposit for a house can take years of scrimping to finally have a large enough deposit on an average priced home; however without the salary multiples to get the mortgage, your dreams of buying a home will remain on hold.
The saving of the deposit is equally as important as having a salary that when multiplied by 4 (it can be 4.5 or 5 but few mortgage lenders offer this) will give you the mortgage you need to combine with your deposit to buy the house. The two challenges for first time buyers are clear:
1. Saving a large enough deposit to buy a home
2. Having a large enough salary to get the right size mortgage
This article looks at how much deposit you need to buy a house assuming you have an average salary of £26,500 per year.
Click and find out - How Much Deposit Do I Need to Buy a House
With a Salary of £26,500, How Much Is a Deposit on a House?
Average house prices for England and Wales, February 2015, were £180,252 and £463,872 for London. For a single person, the mortgage on a £26,500 salary would be £106,000 (normally 4 times) which would mean you'll need a deposit of £74,252 to buy an average priced home (that's £357,872 in London!). Saving £200 a month you'd have the required deposit within 31 years!
A more realistic target is to have a larger salary to lower the amount of deposit you need to save. For instance, on a £35,000 salary your mortgage option increases to £140,000, reducing the deposit you need to £40,252; this further reduces if you have a salary of £40,000 to £20,252. But who has that much control over their salary increases?
It's clear that saving such large deposits are unrealistic, without help from parents, so you are faced with little options to either look for cheaper properties (hoping you live in an area where there are cheaper options), or continue to live at home or rent for an indefinite period whilst you save.
Save a larger deposit or buy with someone else?
With such a gap between your deposit and an average property price a single person on their own will struggle to get the mortgage they need to plug the gap; but what if you buy with someone else? Sharing with another person on a £26,500 salary means the potential maximum mortgage becomes £212,000 - more than enough to pay for an average priced home (making sure to buy a 2 bedroom not a 1 bedroom - unless you are buying with a partner!).
So imagine buying a home with your friend or family member for £220,000. You still need to save a deposit, normally 10% which equates to £22,000 or £11,000 per person, but Help to Buy can reduce this to 5%. The balance of £198,000 can be funded by a joint mortgage application with a combined salary of £49,500, or £24,750 per person. By pooling deposits and salary multiples, buying a home is now more achievable.
Need help?
Sharing a mortgage and deposit can help first time buyers achieve home ownership without having to save an unrealistic deposit. If you are interested in finding out more about buying with someone else, please call us on 0333 344 3234.
