With the cost of renting making buying your first home seem nearly impossible, taking the first step on the property ladder might seem like a wishful fantasy. What really rubs salt in the wound is that in 1960, the average first-time buyer was just 23 years old, paying a deposit of £595 on their first home (equivalent of around £12,738 today). Fast forward to today and the average age of a first-time buyer has risen significantly. In the last decade first-time buyers were aged 32 years on average when they bought their first home. But at the age of 25, and on a very average wage, I managed to put a deposit down on my first home last year. So if purchasing your first property is a personal goal for you here are some of my top tips to help you make it happen this year.
MOVE AWAY FROM RENTING
If moving in with family is an option discuss the possibility with them. Living with family could allow you to save £££’s a month towards a deposit on a house! I moved in with my mum and dad for 3 months before buying my flat and it helped me increase my deposit and save up for solicitor costs.
If you have friends that have a spare room to let, it is worth looking to see how much you could save by living with them for a short while. Moving into a shared house is usually cheaper than renting alone, giving you the chance to save up for a place of your own.
Renting is ridiculously expensive today. Monthly mortgage payments can sometimes work out cheaper than monthly rent payments (we know how ridiculous this sounds!). Therefore, while you think you might not have a big enough deposit to afford your first home it’s worth checking a mortgage calculator to see exactly how much it would cost you.
REDUCE YOUR OUTGOINGS
Do you know how much you earn and spend each month? If your answer is anything but yes then you need to change that! I track my finances on a spreadsheet as well as using budgeting apps and checking my bank balance regularly. Here are some more actions you should consider to reduce your monthly spending:
- Cut your bills. If you haven’t switched energy provider for 2 years or more now is the time to switch. I switched to Bulb this year and can’t recommend them enough, they pay you £50 for switching, cover any cancellation fees and provide 100% renewable electricity!
- Reduce the cost of groceries. Stop choosing expensive brands, in most cases the shops own brand has almost the exact same ingredients. I also claim £100’s worth of free food with various apps, coupons and offers to help keep down the cost of my food bill.
- Cancel unused contracts. Are you paying for entertainment packages and gym memberships that you aren’t using? Quit the gym and go for daily walks or jogs instead.
BOOST YOUR DEPOSIT
The most productive way to move towards buying your own place is to increase your income! Is it time to request a pay raise? Could you ask for extra hours? Is there a side hustle you could manage alongside your job?
There are tons of ways to earn more money. I did everything from finding part-time work, completing surveys, mystery shopping, selling unwanted stuff, and blogging to help me build my deposit! It’s best to access the skills you have when looking to find a side hustle. Do you have a skill that you could freelance? Do you have friends or family that are looking to hire someone for some casual work? Could you turn a hobby into a side business?
Once you start earning more you will want to look into a savings account. When I decided to save for a house I opened a Help-to-Buy ISA but these ended in November 2019. Instead, you can now apply for a LISA (Lifetime ISA). You can use a LISA to buy your first home (or save for later life). Put in up to £4,000 each year and the government will add a 25% bonus to your savings. You can gain a government bonus of up to £1,000 per year. You can use your savings to help you buy your first home if all the following apply:
- the property costs £450,000 or less
- you buy the property at least 12 months after you open the Lifetime ISA
- you use a conveyancer or solicitor – the ISA provider pay the funds directly to them
- you’re buying with a mortgage
If you’re buying with someone else who also has a Lifetime ISA, they can use their savings and government bonus too!
DO YOUR RESEARCH
Do you know what kind of home you want… or more importantly, do you know what kind of home you can afford? You may need to make compromises and remember that this is your FIRST home, you can always upgrade in the future when you’re in a better financial situation!
Don’t forget about the hidden expenses! Buying a home can be a good investment, but make sure you understand the fine print costs, fees and taxes involved. Always question anything that you don’t understand with your mortgage advisor and solicitor.