It can take a pretty big deposit to secure a good mortgage with a good interest rate. Read through our guide on how you can start planning for your first mortgage to make your dreams a reality.
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Weigh Your Options
Many people would prefer to own their homes rather than rent them, but most people under-30 don’t have the means to buy them. So they rely on help from other sources, most commonly their parents. The average deposit for a mortgage is 20% of the price of the home, which can equal $20k or more. The good news is that there are options available to you:
Parental Help
Parents can help by giving money informally or arranging with a mortgage lender to act as a guarantor or offer some of the funds themselves.
Buy Together with Friends and Family
You may be able to group with friends and family to buy a home together but remember, this could cause trouble if someone wants to sell.
Shared Ownership
If you’re renting a council house and have an income below a particular level (find the threshold for your area online), then you might be able to buy part of the house and rent the rest. This can reduce the mortgage cost but does mean still paying some rent.
Help to Buy
Help to Buy schemes are offered by the government to help you purchase a new-build property. They allow you to make a smaller deposit, with the government loaning you the rest. The loan is free for the first five years, but you must pay the government back from year 6.
Work Out How Much to Save
Use a savings calculator to determine how much you can save. Once you have your deposit amount, you can devise a plan to reach that target. How long it takes depends on your saving ability and how much you can realistically save each month. If you wanted to put together a deposit of $10,000 in three years, it would require setting aside $265 a month. That sounds like a long time, but it’s better to save up properly than save too much and give up or put your financial security at risk.
Get Started
Now it’s time to decide where to put the money. You might already have an account that allows you to create a separate pot for your savings, or you may have to open up your account. We recommend looking for a reasonable interest rate even if your money is tied up in the account. After all, it will be a few years until you need it.
Price Comparison
Websites Comparison websites are a great way to find savings accounts that meet your needs. Money Supermarket and Money Saving Expert are great choices. Remember that these websites won’t all have the same results, so trying a few different sites is worth trying. Also, be sure to research the kinds of products and features you need from a supplier before choosing one.
Watch the Money Tree Grow
Be sure to keep a close eye on your savings account. Look at it at least once or twice a year to ensure you get a reasonable interest rate. Find a cash ISA that allows you to deposit and store money without paying tax, but look closely at the terms and conditions to ensure you’re getting a reasonable interest rate.
What to do From
There You should open up your savings account if you don’t have one already. Take a trip to your bank, build a society to see what they offer, or shop around online to find something suitable. It’s worth seeing if you can reduce the deposit size, such as with support from friends and family or through a Help to Buy scheme. Lastly, you want to set up regular payments into your savings account through direct debit. That way, the money comes out of your account before you even have a chance to spend it. Just sit back, watch the money roll in, and make the deposit only when you feel comfortable.
