Getting the money together for a house deposit can be stressful but the rewards are outstanding. Find out how first time buyers can get into their very first home.
House prices have increased substantially over the past 10 years, making it more and more difficult for young people to get a foot onto the property ladder. However, first time home buyers should not despair. Despite the high prices, if a sensible savings plan is adopted, it is still possible for prospective purchasers to get into their very first home.
Cut Back on Luxuries
Unless a person is very well off, it is inevitable that sacrifices will have to be made when it comes to saving up for a home. However, this does not have to mean giving up everything that is enjoyable and leading an unexciting life. Small lifestyle changes, such as taking a list to the supermarket, taking up running instead of paying for a gym membership and cooking meals at home instead of dining out will all help boost house savings.
Budgeting software such as Moneydance can also prove extremely useful. Keeping careful track of exactly what is being spent enables the user to cut back on unnecessary expenses. Seeing the steady growth of any savings also helps keep the individual focus on their ultimate goal.
Moving in with the Parents
This may sound crazy but it is an option that increasing numbers of young first home buyers are taking. Living with family for a period of time allows individuals to save their money at a faster rate as they are not pouring their cash into rent. Most young people will either pay their parents for their cost of living or will contribute in some other way, by cleaning the house or doing chores. This is a small price to pay if it facilitates a swifter move into that very first home.
Choose a Premium Savings Account
There is no point in leaving house savings in a standard checking account, where the money will not be accumulating any interest. First home buyers should make their house savings work as hard as possible by opening a high interest savings account. In the United Kingdom, Abbey offers an e-saver account, which pays an interest rate of 6.50%. In the United States, HSCB offers a very flexible online savings account with an interest rate of 3.05%/APY, one of the highest savings rates in the country.
Many banks will even offer a savings account specifically for people saving for their first home. For example, in New Zealand, the National Bank Home Savers Account earns 7% in interest if at least $20 is deposited during the preceding month.
Be Aware of Market Conditions
Internationally, house prices have been inflating rapidly for the past decade. However, the tide has now begun to turn. The United States and the United Kingdom are both experiencing a property slump. Even countries as far removed as New Zealand are facing a significant slowdown in the housing market. Although this is bad news for property investors, owners of rental properties and individuals needing to sell their homes, it is good news for young people dreaming of purchasing their first home.
With the market cooling, property will become more affordable and getting into a home will be easier. The only thing to be aware of is that, even though property prices are falling, the interest rate on mortgages may still be high. Prospective purchasers should certainly keep their eyes out for any bargains but should also make sure that they do not become lumbered with an overly high mortgage rate, especially as these unsustainable interest rates should gradually start to come down over the next six months or so.
For more information on saving and buying a first home, read these articles on 'An Insiders Guide to Buying a Home' and 'First Time Home Buyers: Tips to Successfully Purchase Your First Home.'
