Wednesday, 16 November 2016

A lazy little guide to saving for your first house

A year ago graduated from Uni and now I’ve just moved into my first house. Lots of people are in the same situation as me and I’ve learnt a lot that might be helpful. However, property talk is boring and saving sucks. Everyone loves a good home haul filled with copper pieces that you’re lusting after but you can’t keep buying homeware if you don’t have a home right? I love getting spendy and, until recently, my property knowledge consisted of old episodes of ‘location location location’. As it turns out, living with my parents is a real drag so I got serious about saving hard and smart too (round of applause please for being super mature and grown up). My generation are the lucky bunch who left school at the start of the recession and have been dubbed by the media as unlikely to be able to buy a house and have children in a lifetime. I’m shunning those labels and I thought that quite a few of you out there might be in the same boat as me. This post is a collection of top things I have learnt in the last few months and hopefully it’s less boring than your average property chat!

How much do you actually need?

If you don’t know this, work it out right now! Getting a mortgage is a tricky pickle and knowing exactly how much you need will help you to take real steps towards a home of your own. Firstly you need to swot up on property prices in your area and the type of property you are looking at. Next you need to work out how much you will actually be able to borrow. Banks can help you with this, many banking websites have their own calculators which will tell you how much they would be willing to lend based on your income etc. The last figure you need is how much you actually have to put away each month. Money Saving Expert has a great calculator the helps you work out what you need to save in an easy idiot proof way.

Where can you save money?

Instead of working four jobs to speed up the process, comb your way through your statements and see where you’re getting spendy. Delete your shopping apps and your one click ordering and give yourself spending limits (don’t hate me, you know it’s the only way). If a house is your biggest priority, here is where you need to get brutal. Do you really use that £40 a month gym membership or did you sign up because of the poster girl? Do you need to go for drinks twice a week? Is £50 a month on makeup a little excessive? Cut it all out for a little while and you will reap the rewards. For example cutting a four times a week Starbucks habit to a once a week saves me £9.90 a week, which is £39.60 a month, which is £475.20 a year. That doesn’t include any sneaky bakery items either, and trust me there are quite a few unaccounted for brownies in there!

What’s out there to help?

Surprisingly, a lot. Living in the UK gives you access to real help as a first time buyer and utilising this could save you a lot of money. Disclaimer on this section: this is a brief overview of what is out there that you might be able to use, you wont be eligible for everything and I recommend you do a lot of research into each one before choosing to go ahead!

Help to buy ISA is a code word for free money. The government will genuinely give you money when you save for a house. No this is not a trick. After you save £1,600 you will be eligible to receive a payment to help you towards a deposit. There is a sliding scale but the maximum they can give you is £3,000 once you save £12,000. That’s £3,000 for free and in my book that is the easiest money ever. These are widely available throughout banks so do your research and make sure you are getting the most you can out of it. The only downside is there is usually a minimum of two years where you can't get to the money. We wanted to buy in under two years so we decided not to use these, but I have heard some great things and it is free money!

A Help to Buy equity loan is available for new build homes. You only need a 5% deposit, you’ll be given 20% towards the home and then you only need a 75% mortgage to top it up. It has to be a new house, it has to be your first house, and you have to be planning on living there, not renting it out or anything. If you’re living in London they can help you even more with this scheme so look into your options. Again I haven’t done this so please research your socks off before entering into it as my knowledge on this is limited.

Shared Ownership has become a popular way to get on the property ladder without waiting for years of savings. It’s also how we bought our first house. It basically means you would own a share of the property and live in the residence whilst paying rent to the owner of the other share, which is most commonly the Housing Association. This crops up with new builds and can mean you only need half the deposit of owning the full property and can borrow half as much through a mortgage. They also often allow 5% deposits so you can buy a house with a much smaller deposit than usually required. The other major benefit is Staircasing, this allows you to buy more and more of the property as your situation improves meaning you can staircase your way to owning the full share of the house. The negative of shared ownership is that is works on a first come, first serve basis meaning it’s a race to buy. It took us months to even get to the point where we were in the top ten. Everything happens for a reason but you have to be quick to get in on these. Research new build sites in your area and be ready to pounce. It's not for everyone but it's the only way we were able to buy. 

Next steps

Get to know a mortgage broker. They will break down all of the estimated fees for you and trust me there are a lot of these! This might be a reality check if you have only saved as much as your deposit requires. Make sure you understand exactly who you are paying, how much you’re paying and what it is for. The last thing you need is to pay more than you have to. Keep the broker on hand as you start your property search and they will be able to complete faster if they have all of your up to date details. You should never pay a fee for this service so avoid anyone that is trying to charge you.

A little note from me…

One thing is for sure being a first time buyer gives you a lot of options and power. It’s a long slog but it will be worth it in the end when you are sitting in your brand new home surrounded by stylish copper pieces (or you know, boxes!). A lot of us feel your pain here especially if you are living with your folks, just try and stay positive. You got this! 
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