For first-time buyers, saving for a mortgage deposit is typically one of the biggest obstacles to getting a foot on the property ladder.
And, with the cost of legal fees, stamp duty and other important expenses, the home buying process can be quite complex. So much so, that some prospective buyers are misjudging the true cost of buying a home.
First-time buyers underestimating deposit costs
A recent study by KIS Finance revealed that while 56% of people managed to buy their first home at age 28 – two years before their predicted age of 30 – they underestimated the cost of a house deposit by 56% (£14,714).
The study questioned 1,000 Brits on life milestones and compared the results to official data from the Office for National Statistics to find out how expectations can differ from reality. Respondents thought they’d need about £18,000 for a deposit, whereas data suggests it’s closer to £33,000.
Several factors allowed first-time buyers to get their funds together. Some 81% of respondents used savings for their deposit, while 29% used a gift of loan from family and 7% inherited the money.
Interestingly, the survey revealed that the majority of people thought they would get married before buying a property. In reality, though, Brits tend to do this in reverse by purchasing a home, having a child and then getting married.
How to save for a mortgage deposit
With the above research in mind, it’s important that first-time buyers are aware of the true costs involved when purchasing a property. That’s why here at Kings Group, we have put together four vital tips on saving for a mortgage deposit.
1. Find a savings account that’s right for you
It’s typically easier to save for a deposit by putting money aside into a separate account. This will enable you to keep track of how much you have and avoid accidentally spending it.
You will need to find the right savings account that will let you withdraw and pay in when you need while offering a high interest rate. The types you can get include; a regular savings account, instant access accounts, cash ISAs, fixed rate savings accounts and many others.
2. Set a target
While it may sound like a simple starting point, it really helps to get a clear picture of how much your new home is likely to cost so you can work out how much you will need to save. Do some searching online to build a picture of house prices and trends in your desired area.
You will then need to assess your current financial position and work out how much you can potentially borrow for a mortgage. Of course, your estate agent will be able to assist you with this.
3. Cut down on everyday spending
This might sound cliché, but making small changes to your everyday outgoings can make all the difference. Identify any areas you can cut back on – e.g. making coffee at home and limiting the amount you spend on clothes each month – in order to free up substantial amounts of cash to be stashed away in your deposit fund.
4. Get a helping hand with your deposit
Alongside reaching out to the Bank of Mum and Dad, there are other solutions which can help you get on the property ladder quickly. These days, more high-street banks offer 95% loan-to-value (LTV) mortgages where you only need to put down 5% of your target deposit.
Secure the right mortgage with Kings Group
At Kings Group, we offer a range of services to help first-time buyers get their foot on the property ladder. For example, our Mortgage Service is available to you whether you are a first-time buyer, looking to remortgage, or are looking for a buy-to-let.
Our expert advisors will look at your position in detail and help you find the right mortgage product for your needs, explaining the options available in a clear and straightforward way so that you can make an informed decision.
We will also guide you through the application process and ensure that all details are correct, and can even arrange appropriate mortgage protection if needed.
What’s more, our experienced mortgage advisors have access to a wide selection of mortgages, including some that are exclusive to Openwork Ltd – which is authorised and regulated by the Financial Conduct Authority.
By planning ahead and getting advice from a knowledgeable agent, home buyers can gain a clear understanding of the true costs involved in the buying process and first-time buyers will be a step closer to achieving their home ownership goals.
If you would like any guidance on buying a property in North London, East London, Hertfordshire, Essex and the surrounding areas, contact your local Kings Group branch today.Also, to see how much your home could be worth on the current market, you can request a free instant online valuation here.