First time buyers are in trouble.
Even in the pre-economic downturn world getting on the property ladder was no mean feat. Bankers and home owners enjoyed almost ten years of high returns from incredible house prices. While the good times rolled, would-be buyers looked on with envy. When the Credit Crunch suddenly appeared, a monster of debt, and ate up all the profits, the economy deflated like a tired old birthday balloon.
Would be buyers are in no better position to buy. Mortgage requirements have increased a hundredfold. Banks in the UK won't give out 100% or 90% mortgages anymore. First time buyers are now having to save up to 60% of the house price.
The first step up the ladder is feeling more like a giant leap.
For those desperately seeking a deposit, here are a few handy hints to help you on your way.
Step one: The Budget
Time to tighten your belt and spend wisely.
- Work out your spending. Write down everything you spend then highlight the inessentials.
- Download the D Budget plan from http://sites.google.com/site/simpledbudget This is a financial management website, designed to help you cut your spending and hit your targets. That may mean goodbye to the cigarettes and alcohol.
- Be energy efficient. Use low-energy light-bulbs. Unplug electrical appliances not in use such as laptops and mobile phone chargers. Have a short shower instead of a bath, etc. Good for the environment and your pocket.
- Cut costs on Transport. Cycle to work, or do a car share. Or, use public transport.
- Bargain buys. Buy in the sales, or bargain basement stores.
Play the Banking Game:
- Saving accounts. Put your money into higher interest saving accounts. Although the Credit Crunch has meant that banks are reluctant to lend high mortgages, it does mean that on a whole interest rates have increased. There is no better time to save.
- Spend cash not credit. Only spend what you have in your wallet. Don't build up the credit card debts. In fact,...
- Cut up your Credit Cards. Pay off your credit cards first. A bad credit rating will affect the type of mortgage you could get.
- Invest. ISAs, for example, are tax free and take me to my next point.
- Check your taxes. Make sure you're paying the right amount of tax.
- Claim benefits, if you're entitled to.
- Rent. If you're renting, talk to your landlord. Try and negotiate a cheaper rent. If not, your parents' home might be the best option.
The Right House for the Right Price:
- Check the Market. Buying a home is a big decision to make. If you get it right it could be a lifetime investment. Alternatively, you could be diving head first into unrepayable debt. Finding out as much information as possible will give you the best chance of making the right decision. You don't want to buy only to find house prices crashing around your ears...
- Shop around. Buying a house isn't just about the deposit . You have to think about solicitor fees, surveyors, home information packs, and so on. Shopping around different agents could save you vast sums that you can better use for your deposit.
- The bigger the better...Deposit that is. Most banks will take out a mortgage insurance if you have a smaller deposit, as you'll look like more of a risk. A higher deposit will make the banks feel more secure and reduce your overall costs.
- Ask questions. Consider alternative mortgages, such as 'green' Ethical mortgages. You can get better mortgage rates for making sure your property is energy efficient. Alternatively, look into Part rent Part buy schemes. You'll only need to secure 25% - 50% of the house price, so you could massively save on the amount you need for a deposit.
Sources/useful links:
www.financialmarkets.co.uk
http://www.rightmove.co.uk/first-time-buyers/shared-ownership.htm
http://moneyfacts.co.uk/
http://www.sustainablebuild.co.uk/GreenMortgages.html
http://www.telegraph.co.uk/property/investmentinproperty/3361361/Money-talk-Saving-a-deposit.html
www.motleyfool.co.uk
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