House deposit - saving up enough deposit to secure a mortgage and get on the property ladder can be a daunting prospect but, like so many things in life, it's all about planning, preparation and taking your opportunities.
For a standard - 10% - deposit for an average house in the UK [corrected for July 2015] you need £18,000, a daunting prospect for many particularly when average wages are £26,500 [corrected for July 2015].
Below, we examine how you can best plan saving for a house deposit. The more control you take over your finances, the more likely it is that a lender will grant you a mortgage and the more you put aside, the cheaper that mortgage will be.
Save time saving for a deposit: team up with others - join Share a Mortgage to find out more.
Work out how much you are spending (and how you can reduce this)
Wherever you live in the UK, the majority of people have to spend at least £10,000 every year, according to many experts, just to maintain themselves. Bare essentials include food, water rates, rent and council tax for pure survival, but modern living involves much much more than this.
If you run a car, then you have insurance,vehicle tax, petrol and servicing to consider and if you live in a rural area, the chances are you may rely heavily on your own motorised transport. You may, however, be able to use a push bike instead of making some car journeys.
A deeper look at your personal finances, however, might reveal areas where your spending becomes 'lifestyle' rather than essential. You can cook your own food rather than eating out - a meal for two in many restaurants, say £50, might pay for a week's food shopping - and you can cut back on other aspects of your social life. You can work out without using an expensive gym: you may just need to employ more discipline.
The point is, if no-one will give you the money, you'll have to secure it yourself, so if you have nothing left at the end of the month you can never save. Most people, however, can make some adjustments which save money on outgoings.
Fine tuning in today's world would include switching energy supplier to get onto cheaper tariffs, bargaining with phone companies similarly and good use of Ebay etc.
Can you earn more?
Because your outgoings are - or should be - limited by your income, your ability to save for a deposit for a house will be increased if you can earn more money. Many people work two jobs but you can achieve as much by getting a pay rise in your current job. Finding out when to ask for a pay rise and how to present your case is a fine skill, but one which you will never regret learning!
On the other hand, if you have no prospect of a pay rise and cannot spare the time to do a second job, you should always look at getting a different job or relocating to somewhere cheaper: reducing your outgoings gives you the equivalent of a pay rise...
What can you save?
Assuming you know what kind of deposit sum you are saving for, you need to work out how much you can save. By doing as much as you can to maximise your earnings and keep your outgoings down, you will get an idea how much you can put away each month. This will in turn give you some idea of how many months or years you will have to keep up your saving.
For a simple example, if you had to save up £18,000 for a deposit and worked out you might be able to put aside around £300 every month, leaving out matters like compound interest and inflation you should look at saving for 5 years to reach your goal. Is this realistic? Could you save more? You need also to allow for life's sudden chances: if you wear high-prescription glasses and break a few pairs, you may have to devote a few months' saving to their replacement.
How do you save?
If you can save money for longer periods without calling it in, you get better interest rates. The Government's Help to Buy ISA, set for launch in Autumn 2015, is targeted entirely towards deposit saving for a home and offers a maximum of £3,000 as a gift to those saving the maximum £12,000, but requires you to 'lock in' your cash.
You can, of course, just save money in your current account and will have immediate access to it, but you will receive a negligible rate of interest.
Can you shorten the time you'll have to save for?
So far, we've taken the view that you are saving for a home of your own. You could, however, look to buy with a partner, family members or friends. As long as you don't then decide to buy a property double the price of the one you were looking at buying by yourself, the chances are that the deposit you'll need will be less for each person.
For example, before, you needed £18,000 deposit to buy a house worth £180,000. You choose to buy with one other person, a friend, and you go for a two-bedroomed flat worth £250,000. To get that 10% deposit, you now need £25,000 but that means you each only have to save £12,500. If you were both able to save £300 per month, then that would take you less than 4 years - a definite improvement!
You should also consider that two people contributing towards the maintenance and upkeep of a property normally more than halves the cost. Council tax does not double, neither, normally do heating bills.
All the pointers discussed above can also help you further through the process. Mortgage applications are more stringent these days: a lender will take time to examine your spending so it's far better if you do so first!
Join Share a Mortgage to match your resources with others to buy a home together. For more information, call 0333 344 3234.
