With rising house prices and young people starting employment later in life, it’s becoming harder and harder for millennials to get their foot on the property ladder. Almost 60% of private renters (over 2.5 million households) say that they expect to buy a property at some point in the future but, with the average age of first time buyers reaching 33 in 2018, up from 31 in 2007-08, that dream is becoming further out of reach (Ministry of Housing Communities & Local Government).
Fortunately, there are some things you can do to speed up the process. In this article, Matt Stevens, Managing Director at The Mortgage Genie shares his top tips to help you save up for a deposit, find the right home, and get on the property ladder.
Come up with a plan
The average first time buyer deposit ranges from £13,700 to £175,000, depending on whether you live in Barrow-in-Furness or Camden (Which?), so you’ll need to start saving if you want to get on the property ladder. The first step to achieving this is to create a financial plan that breaks down what’s coming in and out of your bank account each week or month, depending on how you get paid.
Budgeting is what allows you to have an overview of your financial position and, crucially, it will help you determine how much you can put away each month. This, in turn, will determine how many weeks or months it will take you to save up for the required deposit. It may sound obvious, but the trick is to make an honest assessment of your situation and come up with a monthly or weekly savings goal you can reasonably stick to.
Be prepared to make sacrifices
After coming up with a long-term budget and plan, it might seem like being a homeowner is a still long way off. One way to bring that dream a little closer is to start making sacrifices. Millennials often get a lot of negative press for spending money on expensive Starbucks coffees and eating avocados for breakfast, and this is largely unjustified. But there is an element of truth to it, and that is the idea of cutting back and making sacrifices to get on the property ladder.
After coming up with your budget, you’ll be able to see where you can make some extra savings. Are you getting more takeaways than you should? Do you really need monthly subscriptions to ten different services? Will you be going on holiday this year? The answer to these questions is down to you and how quickly you’d like to own a house. But the more you can sacrifice, the sooner you’ll get your foot on the ladder.
Look for ways to generate some extra cash
If you aren’t prepared to make sacrifices in order to hit your savings goals, the next option is to look for ways you can get some extra cash. Many millennials feel like they simply aren’t earning enough money to be able to save enough for a deposit. As you’re in the early years of your career, your pay will only increase over time. But, if you feel like you work hard and bring a lot to your company, then it might be time for a salary review so you can increase your pay packet.
The other increasingly popular choice is to join the gig economy to earn some extra cash. From services like Uber and Deliveroo to online job platforms like Upwork and Fiverr, it’s never been easier to earn a bit of extra cash, even from the comfort of your own home. Think about what skills you have and how you can monetize them. If all this extra cash goes into your savings pot, you’ll be well on your way to a deposit.
Take part in government schemes
To boost your hard-earned savings even further, it’s worth taking a look at the various government schemes out there designed to help first time buyers. Help to Buy ISAs are the most popular way to save up for a deposit. Not only will you earn interest on your savings tax free, but the government will also add a 25% bonus when it comes to buying a house. Help to Buy ISAs are only available until 30th November 2019, so now is the time to open one.
Along a similar vein, Lifetime ISAs can also be used to purchase your first home, as well as help save for retirement. The Lifetime ISA offers a 25% government top-up to your savings each year on up £4,000 —that’s an extra £1,000 a year. The main difference between the two is that the Lifetime ISA allows you buy a property up to the value of £450,000, as opposed to £250,000 with a Help to Buy ISA.
Saving up for a deposit for your first home can be a challenging task but, with the right plan and an idea of how you can achieve it, your dream might not be as far away as you think.