Saving the deposit for your 1st home is the biggest hurdle for buyers so we put our top 5 tips to help you save your first house deposit faster to help you achieve your goal faster. With the ever-increasing cost of living, having money left over each month to save towards your home can be hard.
We have put together our top tips to make saving your deposit that little bit easier and to tell you everything you need to know to about who you pay the deposit to, when and where else your deposit can come from.
But how much deposit do you need to buy a house?
We advise aiming for a minimum of 10% if possible. Now we know this is easier said than done but saving a 10% deposit will open more lender options for you as not all lenders offer a 95% mortgage and if they do, they often come with a higher interest rate which will increase the overall cost of your mortgage. By hitting a 10% deposit you will have many more lending options which will improve your chances of securing a cheaper lender.
Can your house deposit come from multiple accounts?
Yes, it can. Lenders and solicitors will want to see the funds sat in an account in a format that evidences that the funds are yours. This evidence will be a bank or savings statement with your name and address on and must be dated within the last 30 days. If you have the deposit across multiple accounts for example if you have some in an ISA, some in your current account or its in Mum & Dads account. That’s OK as long as you can evidence this as explained above.
When do you pay your deposit?
You hand over your deposit right at the end of the transaction. After you have secured your mortgage and all the legal work has been done you will pay your deposit at the very end of the transaction when you exchange contracts.
Who do you pay your deposit to?
At the point of contract exchange you pay your deposit to your solicitor along with any potential stamp duty liability and the fees to the solicitor for the work they have done for you. At the point of exchange and in preparation for completion (typically the following week) your solicitor will send you a completion statement which will outline the remaining costs due from you to the solicitor which will have a total amount owed at the bottom but the breakdown above including the solicitors fee, the stamp duty owed and your deposit amount too.
Open a Lifetime ISA (LISA)
A lifetime ISA also known as a LISA is a government backed savings account where the government will give you a 25% bonus on anything you save up to £4,000 per year, effectively turning your £4,000 into £5,000 each year. No other savings account is going to give you a 25% uplift, so we advise you to open one immediately and maximise this account first. Of the 5 tips in this blog, this one is the one that is going to get you to your target fastest.
2. Pay yourself first
What do we mean by pay yourself first? Instead of waiting until the end of the month to see what money you have left after you have paid for everything else, you send money to your savings account first and live off what is left over. Rather than the other way round. By paying yourself first you make sure that each month you are consistently putting money away towards your deposit, instead of saving a small amount of the remining money you have at the end of the month. By making it a priority on payday you give yourself the best chance to hit your target
3. Save by direct debit
Setting up a direct debit from your current account to your savings account means each month you automatically save towards your deposit without having to think about it. Best advice is to set up the direct debit to come out on the day you get paid or the day after before you have chance to spend it and before you notice. This takes the thinking and the emotion out of savings as the direct debit will save the money for you whether you feel like saving or not.
4. Use Round up apps
Round up apps offer you the opportunity to round up your spending on each transaction to the nearest £. It doesn’t sound like a lot but a few extra pence each day towards your savings can soon add up to a big amount of money in your savings over time.
5. Track how much you have saved so far
Saving your deposit can take time, a lot of time in some cases so tracking your savings will keep you motivated to continue. By setting a goal you have direction and can build a plan on how to get there. E.g. if you need to save £20,000, saving £200 per month will take you 100 months. By tracking how far you have come will motivate you to keep going knowing the end is in site you are so close to achieving your goal.
If you would like to talk to use on how you can save your deposit faster, or if you have your deposit saved and are ready to explore your lending options, please get in touch by hitting the link below.
Your Trusted Mortgage Partner in Hull, East Yorkshire | Green & Green
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