How to Cut the Time it Takes to Save a Deposit for Your First Home - 5 Top Tips for First Time Buyers
By Rohit Kohli
22nd February 2023

Buying a first home is a significant milestone for many people, marking the start of a new chapter in their lives. However, for first-time buyers, saving up for a deposit can be a challenging process that can take years to achieve. With house prices continuing to rise, albeit it more slowly than before, the task of building up a deposit can seem insurmountable, and it's easy to become discouraged.

But the good news is that there are steps you can take to help you speed up the process and get on the property ladder sooner. In this article, we'll provide actionable tips and strategies for reducing the amount of time it takes to save up for a deposit on your first home. Whether you're just starting your journey to home ownership or are further along in the process, we hope this guide will help you achieve your goal of becoming a homeowner sooner.

So, if you're a first-time buyer looking for practical advice on how to save for a deposit, keep reading to discover our top tips and strategies. From setting realistic goals to exploring government schemes and getting expert advice, we'll cover everything you need to know to speed up your journey to home ownership.

Save A Deposit Faster With These 5 Tips

Tip 1 - Set Realistic Goals

One of the first things you should do when working towards a deposit is to set realistic goals. It's important to have a clear understanding of how much you need to save and how long it will take to reach that target based on your income and expenses. This will help you stay motivated and on track and make it easier to track your progress.

To begin, consider your budget and how much you can realistically save each month. A good rule of thumb is to aim for a deposit that's at least 5% of the purchase price of the property, although, if possible, at least 10% would put you in a stronger position, you don’t want to be unrealistic. Take into account the average property prices in your desired area and work out the amount you need to save.

Next, set a timeline for achieving your deposit goal. Again, be realistic, consider your income, expenses, and other financial commitments. Break down the total amount you need to save into smaller, more manageable chunks, such as a monthly savings target.

By setting realistic goals, you can make saving for a deposit more achievable and less overwhelming. Remember to keep track of your progress and, importantly, celebrate your milestones along the way. With the right mindset and plan in place, you'll be on your way to owning your first home in no time.

Tip 2 - Make Saving a Habit

Saving for a deposit on your first home requires consistency and discipline. Making saving a regular habit is key to building up your deposit fund faster. Here are some tips to help you make saving a habit -

  • Automate your savings -Setting up a direct debit or standing order from your current account to a dedicated savings account each month can make it easier to save regularly without having to think about it. You can also consider using apps like Plum, Cleo, or Chip which help you save money automatically by analysing your spending habits and moving small amounts of money from your current account to a savings account on a regular basis.
  • Cut expenses but find the right balance -Look for ways to reduce your expenses and find more money to put towards your deposit fund. This can include cancelling unnecessary subscriptions, reducing your utility bills, and cutting back on eating out or other discretionary spending. However, it's important to find the right balance. Cutting too many expenses can lead to frustration and make it harder to stick to your savings plan. It's important to keep some room in your budget for treats and fun, but always make sure to prioritize your savings goals.
  • Create a budget-  Creating a budget can help you track your income and expenses and identify areas where you can cut back. This can help you to be more mindful of your spending and keep you on track to reach your savings goal.
  • Get a side hustle - Consider taking on a side hustle or an extra job to earn extra money and boost your savings. You could sell items online, do freelance work, or take on part-time work. By finding ways to make more money, you can increase your monthly savings and achieve your deposit goal faster.

By making saving a regular habit, using helpful apps, finding the right balance in cutting expenses, earning extra money with a side hustle, and creating a budget, you can build up your deposit fund faster and achieve your goal of owning your first home sooner.

Tip 3 - Explore Government Schemes

The UK government offers a number of schemes to help first-time buyers save up for a deposit. These schemes can help you achieve your deposit goal faster and get on the property ladder sooner. Here are some of the schemes you should consider:

  • Lifetime ISA - The Lifetime ISA is a savings account that allows you to save up to £4,000 each year towards a deposit on your first home. The government will add a 25% bonus to your savings, up to a maximum of £1,000 each year. To be eligible, you must be between the ages of 18 and 39.
  • First Home Scheme - (also known as the New Home Scheme) Launched in March 2021, this scheme provides first-time buyers with the opportunity to purchase a new build home with a 5% deposit. The scheme offers a government-backed mortgage guarantee, making it easier for lenders to offer 95% loan-to-value mortgages.

By exploring these government schemes, you can find the right option to help you save up for a deposit on your first home. Each scheme has its own criteria, benefits and drawbacks, so make sure to do your research and seek advice to see which scheme is best for you. In the next section, we will discuss shared ownership in more detail, which is another government-backed option for first-time buyers to consider.

Tip 4 - Consider Shared Ownership

Shared ownership is a government-backed scheme that allows first-time buyers to purchase a portion of a property and pay rent on the remaining portion. This can be a good option for those who can't afford to buy a property outright or struggle to save a large deposit. Here are some key things you should know about shared ownership:

  • How it works - With shared ownership, you purchase a share of the property (usually between 25% and 75%) and pay rent on the remaining share. The rent is usually set at a lower rate than the market rate. You can buy additional shares in the property over time, a process known as "staircasing", until you eventually own the property outright.
  • Eligibility - Shared ownership is available to first-time buyers who have a household income of less than £80,000 per year (£90,000 in London). You must also not own any other properties and not be able to afford to buy a suitable home on the open market.
  • Costs - When purchasing a shared ownership property, you'll need to pay a deposit on the share you're buying, as well as any legal and mortgage fees. You'll also need to pay a monthly rent on the remaining share, as well as any service charges and ground rent.
  • Pros and cons - Shared ownership can be a good option for those who can't afford to buy a property outright, as it allows you to get on the property ladder with a smaller deposit. However, there are some drawbacks to consider. For example, you'll have less control over the property and may be limited in terms of making changes or improvements. There may also be restrictions on renting out the property or subletting, which could impact your long-term plans.

By considering shared ownership, you can explore a government-backed option that can help you get on the property ladder with a smaller deposit. However, it's important to weigh up the pros and cons and make sure it's the right option for your individual circumstances.

Tip 5 - Get Expert Advice

While there are many strategies you can use to speed up your journey to home ownership, it can be helpful to get expert advice. A mortgage adviser can provide tailored guidance and support to help you navigate the complexities of the mortgage market and find the right product for your needs. Here are some reasons why you should consider getting expert advice:

  • Understanding the market - The mortgage market can be complex, with a wide range of products and lenders to choose from. A mortgage adviser can help you understand the different options available and find the right product for your needs.
  • Access to exclusive deals -  Some lenders offer exclusive deals that are only available through mortgage advisers. By working with an adviser, you may be able to access these deals and save money on your mortgage.
  • Application process - A good mortgage adviser will take care of the entire mortgage application process, from filling out the paperwork to liaising with the lender. This can save you time and stress, and ensure that the process runs smoothly.
  • Tailored advice - A mortgage adviser can provide tailored advice based on your individual circumstances, helping you to make informed decisions about your mortgage and home ownership goals.

By seeking expert advice from a mortgage adviser, you can gain valuable insights and support to help you achieve your goal of becoming a homeowner sooner. A good mortgage adviser will be able to help you navigate the complexities of the mortgage market, find the right product for your needs, and provide tailored guidance and support throughout the entire application process.

Saving up for a deposit on your first home can be a challenging and time-consuming process, but there are steps you can take to speed up the process and get on the property ladder sooner. By setting realistic goals, making saving a habit, exploring government schemes such as the Lifetime ISA, the New Home Scheme, and shared ownership, and seeking expert advice, you can improve your chances of becoming a homeowner sooner.

At The Mortgage Stop, we understand that buying your first home can be an overwhelming experience, but we're here to help. Our team of experienced mortgage advisers can provide tailored guidance and support to help you navigate the complexities of the mortgage market, find the right product for your needs, and take care of the entire mortgage application process.

 If you need a hand to create a plan as we have suggested above or would like to discuss your options further, please don't hesitate to get in touch with us. Contact The Mortgage Stop today to start your journey to home ownership.

Your home may be repossessed if you do not keep up repayments on your mortgage

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