MORTGAGES
Saving for a deposit
Navigating the path to owning your first home can feel like a maze, with the most challenging part often accumulating a sufficient deposit. Roxburgh Financial Services is here to guide you through this daunting yet entirely achievable process, offering expert mortgage advice tailored to your unique financial situation.
Our focus on helping you understand and prepare for the financial demands of purchasing your first property is unmatched. Here’s how we break it down.
Understanding your deposit needs
The foundation of your home-buying plan begins with understanding the deposit size you need. Typically, this deposit must cover at least 5% of the property’s purchase price. However, the amount required can vary significantly based on your income and the mortgage lender’s criteria.
Lower earners may need more than the minimum to secure the desired home. Conversely, purchasing a home jointly might enable you to apply for a larger mortgage and, consequently, gather a larger deposit.
How to accelerate your savings
Evaluate your spending habits
A thorough analysis of your spending habits can identify areas where you could reduce outgoings and enhance your savings capacity. By creating a detailed budget, you can set realistic saving targets and identify unnecessary expenditures to cut.
Reduce outgoing bills
One of the most effective ways to boost your savings is by minimising your regular bills. Consider:
Switching to more affordable energy tariffs. Exploring cheaper options for mobile phone and broadband packages.
Applying for council tax discounts is applicable in certain circumstances, such as living alone. Cancelling subscriptions you no longer use or need, from streaming services to gym memberships.
Optimise daily expenses
Small daily savings can accumulate into substantial amounts over time. Take a closer look at your bank statements to pinpoint areas where you can trim everyday expenses. Many banking apps categorise spending automatically, making it easier to identify potential savings.
Smart financial habits
Incorporating loyalty and cashback credit cards into your daily spending habits can be a productive strategy. These cards reward you with a percentage of your expenditures as a credit, saving you money in the long run. Managing these cards wisely by settling the entire balance monthly to avoid negating the cashback with interest fees is crucial for maximum benefit. Additionally, responsible use of credit cards can enhance your credit score, a critical element in securing favourable mortgage terms.
Technology for effective saving
Advancements in technology offer innovative tools to bolster your savings efforts. Utilising budgeting apps and opening a dedicated savings account for your home deposit can segregate your funds, allowing for more precise tracking and management. The choice of a savings account should align with your saving goals, frequency of contributions, and timeline.
Understanding potential mortgage amounts can clarify what type of property is within reach, guiding your savings targets. It’s important to remember that buying a home involves additional expenses, including conveyancing fees and moving costs. Leveraging apps that round up transactions or analyse your spending to save accordingly can help build your deposit. While these apps may not offer interest, transitioning saved funds into an interest-bearing account is wise to ensure your savings grow.
Lifetime ISA
The Lifetime ISA (LISA) presents an advantageous option for those committed to maximising their savings. Currently, if you’re aged 18 to 39, you can open a LISA and save up to £4,000 tax-free each year, up to and including the day before your 50th birthday. By saving in a LISA, you benefit from tax-efficient growth.
The government pays a 25% bonus on top of your contributions for your first home up to a maximum of £1,000 a year. You can withdraw from your LISA after 12 months from your first payment to buy a home with a purchase price of up to £450k. For any other withdrawals before the age of 60, a 25% government withdrawal charge applies, meaning you’d get back less than you paid in.
Renting decisions
One of the most significant expenses for individuals saving for a home is their current rent. We advise a thorough assessment of your renting situation as part of a holistic approach to financial planning for a mortgage. Making informed decisions about where and how you live can unlock substantial savings towards your deposit.
For many, downsizing their rental property can lead to significant financial relief. Opting for a smaller living space reduces monthly rent and decreases utility bills. This freed-up income can then be directed towards your house deposit, accelerating your progress towards owning a home.
Revisit the family nest
An increasing trend among some future homeowners is the choice to move back with their parents. This drastic reduction in living expenses can drastically accelerate your savings plan. Living rent-free or below-market rate while saving on food and utilities can significantly boost your deposit fund.
Creative living arrangements
Other strategies for those who prefer or need to maintain their independence include sharing their space with a lodger or opting for a flatshare. These arrangements can drastically cut down on both rent and utility costs. Moving to a more affordable area is another viable strategy, though weighing any potential savings against the cost of a longer commute is crucial.
Roxburgh Financial Services, your partner in homeownership
At Roxburgh Financial Services, we understand that saving for your home requires dedication, discipline, and a clear strategy. Our team is committed to providing you with personalised mortgage advice, helping you craft a plan that fits your financial reality and brings you closer to the dream of homeownership.
Whether you need to determine how much you need to save, find ways to expedite your savings, or seek the right mortgage options, our experts are here to support you at every step. With the right guidance and planning, we believe buying your first home is not just a possibility—it’s within reach.
Ready to find out more and start your journey towards homeownership?
Begin your path to homeownership with confidence. Contact us today to explore how we can assist you in turning your home-buying aspirations into reality. Your first home is closer than you think.