For young people, or even first-time buyers of any age, saving for a mortgage deposit can be quite daunting. The difficulty boils down to saving as much as possible while navigating rising living costs and balancing a healthy social life.
A deposit is often a stumbling block when you are a first-time buyer. Even if you feel like you are saving every spare penny, that target amount can still seem a long way away. If you are very lucky, you may have your parents/grandparents gifting you money to help, but this isn’t always the way for everyone. Here are my top 3 tips for getting started:
1. Optimise your savings
If you are just getting started, a Lifetime ISA (LISA) is a great place to start saving your money. As long as you’re aged between 18 and 39, you can open a LISA, and save up to £4,000 a year to buy a property (or for retirement or both). Your contributions can be supplemented by a government bonus of 25%, up to the maximum of £1,000 a year. Funds held can be used after 12 months to buy a first home valued up to £450,000.
If you already started saving with a deposit in mind and have a Help to Buy ISA (opening new accounts ended on 30 November 2019), you can also open a Lifetime ISA. However, you can only use the bonus from one of them towards buying a home. Please note you only get one ISA allowance for the year, and this cannot be exceeded across both the LISA and Help to Buy ISA.
2. Checking your Credit Score
When you apply for a mortgage, lenders will look at your credit history to see how you’ve managed any borrowing in the past. They’ll use this information to help decide whether or not to offer you a mortgage. Improving your credit score is something to work on whilst saving for that deposit.
You can get hold of a copy of your credit report for free from a credit reference agency, such as Experian and Equifax and check to see if the information they hold on you is correct and if your score needs to be improved. You can improve it by:
- Always making debt repayments on time.
- Close credit card accounts you no longer use.
- If you’ve never borrowed before, it’s a good idea to take out a credit card and pay off the balance in full each month.
- Make sure you’re on the electoral register. It’s a big part of a credit score that’s pretty easy to resolve.
3. Refine your monthly budgets
Maximising your monthly savings can be difficult if you aren’t clear on your monthly outgoings and costs. Ensure you have your outgoings outlined, budget for your shopping and other spendings, but make sure you make space for things you enjoy so you get a balance between saving and enjoyment.
The above should not be relied or construed upon as advice