When you are purchasing a home with a mortgage, there are a number of costs you will incur as part of the purchasing process. We outline the main ones here.
I was asked recently by a first time buyer how they could speed up the process of saving up for their mortgage deposit.
Although the immediate response is to save more, change jobs or win the lottery, it’s not always possible (sadly) and not the whole story. Depending on your circumstances, there are a number of other options that could be suitable to your situation;
If you are currently renting, some of the biggest savings you can make are usually make are on rental payments. If it’s possible to return home, or find cheaper accommodation, you can increase monthly saving amounts towards your deposit this way. Cutting back and budgeting wisely is not exciting advice, but it does work!
Bank of Mum and Dad
The ‘bank of mum and dad’ or the ‘bank of granny and granddad’ are helping many people buy their first home. By assisting family members with their mortgage deposit, parents and grandparents are often using their savings. This is referred to as a gifted deposit. A gifted deposit is a sum of money that is given by a family member to form all or part of a deposit for a deposit to buy a property. You should always seek independent legal advice prior to entering into such an agreement.
Deposit assistance from mum and dad can also sometimes be provided through an alternative mortgage deal on their existing home (even if they don’t have a mortgage on it already) or by them becoming a joint borrower on your new mortgage. Most lenders will help you understand what deals are available for your circumstances, and if this is an option suitable to you and your family.
Affordable housing schemes
There are also government schemes such as Help to Buy and Shared Ownership, which offer the opportunity to purchase a share in a new build or resale property. The scheme is a cross between buying and renting and allows the purchaser to buy a share in a property usually between 25% - 75% of the purchase price, and then pay rent on the remaining share. In these schemes, the deposit can be a lot lower than would be required when purchasing outright, as the purchaser will often require a smaller mortgage for the share they are purchasing.