Owning a home is one of life’s great milestones, and something to which practically all of us aspire. Unfortunately, property is such a safe long-term investment that its value has continued to rise, and at a much faster rate than the average annual salary has to boot. This, alongside a host of other political and economic factors, has led to a world where owning property is much harder for first-time buyers today than it was for their parents a generation before.
The biggest hurdle to homeownership is the deposit; prospective buyers must be able to pay up at least 5% of the value of the property they are buying, in order to be eligible for a mortgage. Zero per cent mortgages exist, but represent a great deal of risk for the borrower. Even that 5% can be an incredible chunk of money for a relatively young household, though. With this in mind, what are some helpful and actionable tips to help you save up for that deposit?
Choose Your Accounts Wisely
In order to save, you’ll need some savings accounts to hold your savings. This much is patently obvious to even the most financially illiterate of us – but choosing the right kinds of savings account can make a world of difference to your mortgage deposit efforts. For first-time buyers, a LISA is by far and away the most useful financial product. It is government-subsidised, offering 25% (up to £1000) of your balance per year, or effectively a free £1000 each year until you buy a home.
Useful as LISAs are, they’re limited. With other savings methods, you might find yourself saving far more than the upper limit of that 25% subsidy. This is where secondary accounts with high rates of interest can be highly useful, accruing money on their own terms and in parallel to your LISA efforts. Altogether, these accounts can make short work of your savings endeavours.
Of course, in order to have money to put away, you’ll need to enact some savvy savings ideas. Budgeting is much easier said than done, particularly in today’s difficult economic climate, but there are still simple changes you can make to increase the amount you’re putting away. For example, you might change your weekly supermarket shop to target cheaper brands, or even target your utilities providers in search of cheaper deals and tariffs. These are small savings, but they can go a long way.
Loyalty and Cashback
In an indirect fashion, using loyalty cards for supermarkets or petrol stations can help you save up for your mortgage. By subsidising the cost of major expenses like fuel, you free up vital money with which you can pad your savings account.