How to raise money for a deposit
With the cost of renting so high, it can be difficult to have enough money left over at the end of the month to put aside for a deposit to buy a house. However, there are more than a few ways you can be savvy with your money and move ever closer to purchasing that dream home – we take a look at some in this article.
One option for first time buyers is the government’s Help to Buy scheme – designed to help first time buyers get a foot on the property ladder. Help to Buy allows people to buy a home up to the value of £600,000 with buyers only needing to find enough for a relatively small deposit of at least 5%. There are two different options with Help to Buy – first there is the Equity Loan option, whereby the government loans buyers up to 20% of the required deposit. This means that you only have to take out a 75% mortgage, which is a far more affordable and manageable prospect for first time buyers. You only pay it back when you sell your home or after 25 years, whichever is earliest, although you will have to start paying loan fees after the first five years of owning your home. You can pay back part or your entire loan at any time, and the amount you pay back will depend on the market value of your home at the time.
The second option with Help to Buy is the Mortgage Guarantee option, provided to your mortgage lender by the government, making it easier for you to get a 95% mortgage.
An alternative option is called NewBuy which is another government initiative designed to help in the purchase of new homes only. If the property is going to be your main home, will be fully owned by you and is priced at £500,000 or less, then the NewBuy scheme may be able to help you – provided that the house was built by a builder taking part in the scheme. NewBuy, like Help to Buy, will allow you to purchase the property with only a 5% deposit needed.
5% however can still be a big ask for some people and aside from government schemes there are other options that you can explore. Moving back home isn’t for everyone but it can be a good way to save up some extra funds to get a home of your own. Alternatively, you could explore downsizing by renting a cheaper property than the one you are currently in, although saving money doesn’t have to involve leaving your home as you could always take in a lodger. Websites like Gumtree and Spare Room can help you find a lodger or to find a room yourself.
Ultimately though, if you are determined to get a place of your own, then you need to get an idea of where you want to live and how much property will cost there, so that you can set yourself a target of how much you need to save to be able to afford a 5% deposit. Make sure you put back a certain amount each month, perhaps by setting up an automatic payment so that the money goes straight into a savings account, and live within a budget. Cut back on luxuries, but most of all be realistic about what you can afford.
For more ideas and help with finding your first home take a look at our first time buyers’ guide.