The challenge of first-time homeownership

In the current market conditions, prospective first-time buyers face significant challenges in their journey onto the property ladder. From accumulating funds for escalating deposits to locking down mortgages amidst increasing rates, the hurdles are numerous and substantial. Many lenders now require a deposit of between 10% and 15% of the property’s value.

However, government schemes are available to ease the burden of saving for a mortgage. New buyers can customise strategies to confront the prevailing realities by recognising the key obstacles. Here’s a look at the primary difficulties first-time home buyers encounter.

SETTING YOUR SAVINGS GOAL

Once you’ve selected an account to kickstart your savings, the question arises – how do you accumulate the funds? Exactly how much do you need for a deposit? The first step is to establish a savings goal. Consider the type of property you desire and the area you’re interested in. Conducting research into property prices in your chosen locality will allow you to calculate approximately, based on 10-15% of the property value, the required deposit you’ll need to find. This figure provides a tangible goal to strive towards. Keep this number in a visible location, such as near your computer or within your wallet. It serves as a potent reminder to curb impulsive spending on non-essential items.

SEEKING PROFESSIONAL MORTGAGE ADVICE

It’s important to see a professional mortgage broker at the start of your mortgage journey. It can save you a lot of time and effort in the long run and enable you to understand your mortgage options.

To gain clarity on what you can realistically afford, engaging with a professional mortgage broker means you’ll get an understanding of deposit requirements and your potential borrowing capacity based on your income. Your mortgage broker can look through market deals to provide advice on the most suitable lender and mortgage for your circumstances.

THE ART OF FRUGALITY

Are you a fan of a midweek takeaway treat? Do you typically purchase lunch at work instead of preparing food at home? Perhaps you could reconsider your high-end smartphone and its premium monthly contract. As challenging as it may be, tightening your belt wherever possible is highly beneficial.

This could involve cutting back on regular nights out, skipping your daily coffee or reducing expensive contracts like gym memberships. Even minor lifestyle adjustments, such as stricter budgeting on your weekly food shopping, can contribute to notable savings over the long term.

FUNDS FOR YOUR INITIAL PROPERTY DEPOSIT

When you’re genuinely committed to accumulating funds for your initial property deposit, this goal must supersede other indulgences in life. It might be challenging to resist the allure of available theatre tickets, discounted holiday packages or the cutting-edge technology you’re craving. Nevertheless, these sacrifices become more manageable with the ultimate aim in mind and the joy of possessing your own home.

RETURNING TO THE PARENTAL NEST

Moving back in with your parents might not appear to be the most appealing option, but it can be one of the most astute choices when saving for a house deposit. If your parents empathise with your situation, they may let you contribute a symbolic sum towards living costs. As property prices surge and securing mortgages becomes tougher, retreating to the parental home is an increasingly prevalent trend.

Curtailing expenditures on rent, utilities and bills is one of the most potent strategies for amassing significant savings. Establishing ground rules upon returning home is imperative – you’re moving back as an adult, necessitating new boundaries for both parties. Setting a deadline can also facilitate adjustment to being back home.

TAPPING INTO THE ‘BANK OF MUM AND DAD’

You might feel uneasy about soliciting or accepting financial assistance from your parents or other relatives, but the so-called ‘Bank of Mum and Dad’ has been financing an increasing number of property purchases in recent years.

Even if your parents can’t provide a lump sum for your deposit, they can assist in other ways, such as acting as a guarantor on a specific type of mortgage. If your parents are inclined to aid you in ascending the property ladder, there are numerous methods through which they can provide support.

CHOOSING THE RIGHT SAVINGS ACCOUNT

When it comes to securing funds for your first home, it’s essential to be meticulous about what you need from a savings account. Look for an account that perfectly balances attractive interest rates and the requisite access to your money. If you’re setting aside funds over several years, consider accounts that allow regular contributions and offer incentives for not withdrawing your savings.

Alternatively, if your savings have reached a level where you’re actively perusing properties, you’ll want your money in an account that allows speedy access when you discover your dream home. The goal here is to align the need for robust returns on your savings with the ability to respond quickly when the right property opportunity arises.

UNVEILING HIDDEN HOME-BUYING COSTS

Your deposit will unquestionably be the most significant expense when buying your first home. Nevertheless, it’s also crucial to budget for other costs associated with your property purchase. These might encompass mortgage arrangement fees, conveyancing fees, house survey costs and Stamp Duty, not to mention the costs of relocating your furniture or belongings to your new abode if you hire a removal firm.

Incorporating these added expenses into your savings goal, thus enabling you to continue saving while house hunting, ensures you won’t encounter any unexpected financial surprises along the way. Early planning for these extra costs will put you in a stronger position when it’s time to make the big move.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.