5 ways to save up a mortgage deposit
Buying a house is an incredibly big step in life. And not just that, it can be pretty taxing trying to save up the money needed. That is why taking out a mortgage loan seems like the most viable option for most. When you’re taking out a mortgage, in most cases, you need to put down a mortgage deposit. Now, the height of the deposit depends on quite a few factors. However, one thing is definitely certain – the higher your deposit is, the better mortgage deal you will get. So, get to saving! Here are 5 ways to save up a mortgage deposit that will get you into your dream house!
How much do you actually need?
A mortgage is one of the rudimentary steps of the process of buying a house. But, before you try to save up a mortgage deposit, you need to know how much you need to save. Now, in the most common case, you need to put down 5 percent of the value of your future home. The rest then becomes the basis of your mortgage loan. That means that, for a £200,000 home, you would have to pay £10,000.
However, if you put a deposit of 5 percent, your interest rate will not be that stellar. So, what most people strive for is to have at least a 20-percent deposit. With such a deposit, you can get quite good mortgage deals. For instance, for a £200,000 home, you would have to have to pay a £40,000 deposit. So, aim for that 20-percent deposit ballpark and start saving.
Reevaluate your renting situation
In general, renting takes quite the toll on your monthly budget. And not only that, renting also affects your credit score, which is important for your mortgage loan application. That is why trying to adjust your renting situation to your needs might be the best way to go to save up a mortgage deposit. Here are some examples of how to do that.
Consider whether you truly need so much space. If you’re currently living on your own in a two-bedroom flat, you can easily downsize to a one-bedroom flat. It may not seem like much, but that one bedroom actually costs a pretty penny!
If you have excess things, you can always organize a yard sale. Or, you can put them in storage until you figure out what to do with them. Contact professionals and see whether storage would be worth your while, money-wise. Go to wolleymovers.com and check to see whether storage is the more affordable option than paying rent on your two-bedroom flat.
Get a roommate
Another viable option when it comes to lowering renting costs is to get a roommate. Not only will this help you with the rent, it will also help you with the bills. And, this means that you will save up a mortgage deposit much faster.
Return to your parents’ home
Of course, this step is only possible in some cases. It mostly depends on the distance of your parents’ home to your job. There’s no point in moving back if you’re just going to spend time and money on the commute to work. But, if it’s not too far, see if you can manage to return home, just for a little while, until you can save up the necessary deposit.
Again, take everything into consideration. When trying to save up a mortgage deposit, it’s necessary to look through every aspect of your life and cut costs. For instance, if you’re moving home or downsizing, calculate your moving expenses in advance. See whether it pays off more to do it yourself or if it’s best to leave moving to the professionals.
Try to cut down where you can
This seems easier said than done, right? But, with little tweaks here and there, it’s quite possible. If necessary, put everything you spend on a monthly basis on paper. Now, look at your list realistically and see what you can cut down on. Perhaps you’re spending too much on eating out? If you can, try to cook and eat at home more. Try to replace takeaway coffee with the one you made yourself. Take it with you in a thermos. You’d be surprised at how these simple acts can reduce your costs. And, when you reduce your costs, you increase the amount you have saved up.
A good thing here is to write up a “goal budget.” You should create a timeline in line with your possibilities. That is, make your plan as realistic as possible, because that is the best way to save up a mortgage deposit. Now simply try to stick to it as much as you can.
Of course, reducing bills goes hand in hand with saving. Just saving water and electricity can go a long way in trying to save up a mortgage deposit. You can also in general switch your energy bill to a cheaper tariff. Also, cancel any subscriptions you don’t use anymore, for newspapers or magazines. The same goes for gym membership cards you never use. If it’s too high a bill, it can be reduced.
Again, this sounds easier said than done, right? If we could all just earn more, we could all buy luxury homes even without mortgages. However, this doesn’t mean you should get another strenuous job. Let’s face it, that would be unendurable. But, you can earn extra money here and there. For instance, take an odd freelance job from time to time. You can also sell things you no longer use.
Check out the government-funded options
The government actually offers some quite interesting options to help first-time home owners. It essentially does this to encourage home ownership, and this is something you should definitely utilize.
In short, there are a few options that you may consider. There is the equity loan option, Help to Buy ISA, as well as shared ownership. There’s even a low-interest loan option. Go online and find out which of the options you find most fitting for your situation.