Saving for your first home might feel like an uphill struggle at times. We know it’s not easy to find a deposit, especially if a huge chunk of your pay packet goes straight into rent. The good news is that the scales are gradually tipping in favour of first-time buyers. With help to buy schemes and shared ownership becoming increasingly popular options, there are plenty of suitable mortgages out there for new buyers, even if you don’t have a huge deposit.
But what else should you be thinking about if you are wondering how to save for a mortgage whilst renting? Our mortgage experts have collated their top tips to help you find the best ways to save, to help make your dream of owning a home, a reality.
As you start to put some of your hard-earned cash away, think about where you are saving it, and whether you’re getting the best value for money. It rarely makes sense to have money just sat in a current account. It is really important to make sure you have enough cash there for your day to day spending, and some as an emergency fund – but it’s well worth thinking about putting the rest in a higher interest account.
The same applies to any pre-existing Help to Buy ISA accounts that you have. Whilst it isn't possible to set up a new account using this scheme, if you registered at the time, you can keep contributing to it and claiming the additional top-up offer. If you missed out on this scheme, you should still consider whether you are using your ISA tax-free allowance effectively - as even without the help to buy top-up, these accounts are a good way to get the most out of your money by making your savings as tax efficient as possible. Bear in mind that there can be better interest rates on offer on ISAs where your money is committed to staying in the account for a year or two, compared to instant access ISAs, that you can move money out of at any time without being penalised. If your plans to buy are still a few years away, this can be another opportunity to earn interest on your savings.
Please note that we are only discussing cash ISAs here. If you want to look at investing over a longer period (e.g. five years or more) there are things like an Investment ISAs you can consider. If this is the case, then you should seek independent financial advice.
Although you might be saving up for your property, there will almost certainly be other big purchases you need to make during this period. After all, life doesn’t ground to a halt just because you are trying to save money. Electronics, holidays and gifts can all mount up, but by choosing a credit card that offers cashback, or points for your preferred supermarket, you can get a little of the cost back.
Several credit cards will also offer referral services that can give you cashback if a friend takes out a card, and discount codes from certain partner companies. They might feel like small things, but together they can add up to significant savings.
Always bear in mind that credit cards can charge high interest rates after the initial interest free period has ended.
Remember that just because you are in a rented property, it doesn’t mean you need to stick with the default electricity, gas or internet providers that were supplying the previous tenant. Most tenancy agreements allow you to change to a suitable provider, so now is the time to get onto a price comparison website to check that you are getting the best deal for you.
If you use a cashback website it’s also possible to get a cash reward when you transfer to a new provider, so keep your eyes peeled on those too.
Keep a stack of loyalty cards, discount cards, and any other means you can find to get regular discounts from your favourite shops. If you work in the public sector, for example, healthcare, education, or blue light services, lots of brands will offer a small discount even if they don’t publicly advertise it. Additionally, consider using price check websites to shop around if you are looking for a specific item. If you can wait and shop the Black Friday or January sales, you can also make significant savings on high ticket items like headphones, smartphones and gaming systems.
It's worth thinking about where you spend the majority of your disposable income. If you spend a lot on takeaways - think about planning ahead and doing a big weekly shop. The same is true if you end up popping into nearby high-end food shops like M&S or Waitrose, which are often the most convenient, but definitely aren't the most cost effective. If you can, try and think about fitting in the time to do a larger shop at a budget supermarket, which can help you reap substantial savings.
Booking train tickets in advance can be around 75% cheaper than paying on the day. This is particularly true if you are booking at least a month in advance. Of course, this won’t always be possible, but even a few days beforehand you can snap up some good deals, especially if you are willing to travel at off-peak times.
So if you are planning a break with friends, a visit back to family members, or just a day trip on the train, think about whether it’s possible to book ahead and save yourself some cash. It’s also worth thinking about what railcards you might be eligible for. In many cases, the saving you’d make on just one long journey would more than cover the cost of the railcard.
Depending on how far along you are with your home-buying plan, you might not have spent that much time looking for specific properties, or working out exactly how much you need in savings. It’s worth doing that sooner rather than later because it’s useful to have a specific goal in mind to keep you motivated.
You might also be pleasantly surprised about the support available for first-time buyers through government-backed mortgage schemes. As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments. This means that you shouldn’t commit to a mortgage before you are financially secure enough to be able to afford repayments. Get in touch with us today for friendly and free advice on what mortgages are available and suitable for you as a first-time buyer.
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