How to save money for a deposit
When you exchange contracts with the seller, you will be required to put down a deposit. It can be up to 10% of the sale price. There are many reasons for saving for a larger deposit. For instance, it can make getting a mortgage easier.
However, it is not always easy to save when you are already on a tight budget. In this article, we will take a look at how you can save for a deposit.
The foremost important aspect of planning to buy a new home is budgeting. You should first figure out how much you can afford, so you know how much you will have to save. You will have to take time to decipher your spending to see where you can cut back on. If you have life insurance or utility bills, you should do some research to find cheaper alternatives.
How to make your saving work?
Savings rate are facing a downfall, so you need to scan the market and find the best deal. It will be a good idea to go for an Individual Savings Account.
- It will be a good idea to use up all the allowance on your ISA, so you have good tax-free savings. Please see our article on Lifetime ISA to find out how it works.
- A fixed-rate savings account will have better interest rates as compared to quick access. If you can lock away your savings for a few years, you will get the best rates.
How to save if you are renting?
For those people who are renting, it is often hard for them to save up and climb up the property ladder. However, if you choose to not rent for 6 months to a year, it can make a massive difference to your savings.
Are your parents willing to take you in?
If you can move back in with your parents for a short time, you can save up quite a lot. However, it would be best if you discussed with them whether you would be making a financial contribution and other rules they may have.
What are friends for?
If you have a friend who has a spare room, you can move in and help him save 50% on his rent.
If you can find a shared house with a room available, it will give you a chance to save up as all of the cost and bills are split between the people living there.
Borrow from parents
Parents helping out their children for a deposit are not uncommon these days.
A lifetime ISA (LISA) is a type of an account which is designed to encourage people to save money for their first home or their retirement. With as little as 5% deposit you can buy a new property worth up to £250,000. If the property is in London, then the limit is £450,000.
For further information on government schemes to help you climb the property ladder, please read our article.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
We would love to hear what you think about this article and how we could improve it. Please do let us know. However, we shan't be able to reply to your specific questions. If you have a question about a document, please contact us.
If you have noticed a bug or a mistake on this page, or just want to give us feedback, we'd love to know. Nothing is too small or too big. Send your message on this feedback page.