Ways to Raise Money for a House Deposit
Getting the Best First Time Buyer Mortgage Deals
Dec 9, 2008
Making that first step onto the property ladder isn't easy for first time buyers. The main reason for this is that it is very hard to cover day-to-day expenses and save enough for a house deposit when considering buying a home.
A Genuine Opportunity for First Time Buyers
The credit crunch is rarely considered a positive, but falling property prices have created a window of opportunity for first time buyers. The greater the house deposit, the more likely it is that a first time buyer will be able to get the best mortgage deals. The higher the deposit, the lower the risk posed to the lender.
There are a couple of 100% mortgages available. For example, Bristol and West offer a 100% mortgage, but there is a requirement that the parents act as guarantor for the loan. If this isn't a possibility, 95% mortgages are still readily available to first time buyers.
Live at Home Whilst Saving for a House Deposit
Private rental is the main reason first time buyers struggle to be able to afford to save for a house deposit. Most rental properties cost in the region of £600 a month. Living at home will enable most couples to afford a 5% deposit within as little as 12 months.
Get a Second Job or Work Overtime
Few people want to do additional work during evenings and weekends, but it might be a necessary evil in terms of saving for a house deposit. If a regular source of overtime is available in one's primary occupation, this should be the preferred method as overtime attracts a premium rate of pay.
Get a Loan from a Family Member to Cover a House Deposit
See if a family member is prepared to lend money for a house deposit. Although the market is very flat currently, property has on average doubled in value every 7 years. Taking a long term view should result in the creation of equity, although historical data is never a guarantee of this.
The money borrowed could be re-paid when new equity is created further down the line via a remortgage. Alternatively, some of the money could be paid back each month and the rest when sufficient equity exists. Never borrow heavily after steep property price increases.
Get an Unsecured Bank Loan to Cover a House Deposit
Interest rates are very low so there has never been a better time to get a cheap loan. In a rising market this can be the only way a first time buyer can get onto the property ladder. This approach is only advisable for those who have well paid jobs and a low debt to income ratio.
Cut Back on Non-Essential Spending
Whilst the rent and council tax have to be paid each month, there are always other excesses that can be cut back on. Consider doing a few of the following:
- Walking or cycling to work. Travelling to work by car or public transport is becoming increasingly expensive. Living within a few miles of work allows someone to save £60 each month.
- Take a lunch to work. Buying food from a department store or bakery can cost a small fortune. It is possible to save £80 each month by taking sandwiches to work.
- Online price checkers. Check to see if getting the cheapest prices on different forms of insurance and utility bills. Tim Wolfenden, Head of Home Services at uSwitch.com stated "By not switching, consumers could waste over £2.3 billion in total or £334 each.
Use Tax-Free Savings Accounts when Saving for a House Deposit
It is possible to save up to £3,600 a year into an individual Savings Account (ISA). Taking advantage of lawful methods of tax avoidance is a useful way for first time buyers to save extra towards a house deposit.
Buying a home may feel like an impossibility, but saving for a house deposit is possible if sacrifices are made. The best mortgage deals are available to those who offer the highest house deposit. The sooner lifestyle changes are made, the quicker first time buyers will get that foot on the ladder.
Those who are saving for a house may also be interested in Identifying ways to reduce credit card balances and Reducing Energy Bills For Gas and Electricity.
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