When it comes to saving for a house, the process can take a significant amount of time. You are likely to need a reasonable sized deposit to get a more competitive interest rate on a mortgage, so the more you are able to save, the better your situation will be in the long run.
How long will it take?
After the financial crash in 2008 the situation changed dramatically for a lot of home-owners and first-time buyers. When the housing market effectively collapsed, the banks and mortgage lenders cracked down on who they would lend to in a big way. Whereas small deposits, or even no deposit, were often the norm before; after 2008 the percentage needed for a deposit increased significantly.
Research has suggested that it can take up to thirty years to save up for a deposit now. While this is a scary thought, there are various different savings plans available to you that can make saving towards long-term goals a bit easier.
Bump it up
As previously mentioned, you can use a savings plan that ties you in for a longer period of time. While this might not seem realistic, if you are facing thirty years of saving, it could appear appealing. You can also use cash gifts from friends and family to add to your house fund. Some people take on an extra job for a year or so, just to get some extra money coming in. While this isn't ideal for everyone, extra income can help get you into your first home earlier.
What about when I have enough?
Once you've saved enough for a deposit, you may wish to speak to a suitable financial adviser to get information about the mortgage options that are most suitable for you. You may find that as the housing market continues to improve, the mortgage deals on offer are wide and varied. With strong signs of improvement, lenders are beginning to have increased confidence in first time buyers. The Government has also introduced an equity scheme, Help to Buy, which is intended to make mortgages more readily available to people who cannot afford a large deposit. With this scheme, you need just a 5% deposit and a mortgage of up to 75% of the value of the property; the remaining 20% is provided by a Government equity loan which is interest free for the first 5 years. The Help to Buy scheme is available to first-time buyers and people looking to move up the property ladder.
Of course, you can also continue to save for a while longer and give yourself a bigger budget to play with. It's worth remembering that buying a house also incurs various legal fees, taxes and expenses so you will need to ensure you have enough money put aside for that as well. Once you own your house, you may also need to cover the cost of furnishings. While curtains, lampshades and crockery are relatively small purchases, if you are attempting to furnish a three bedroom house, the costs can soon start to add up.
7 Mistakes Millennials Do Not Realize They Are Making in The Workplace
Are you making a big mistake at work? Download our free PDF to find out!