With Christmas fast approaching, are you ready to splash the cash? Check out our tips for sustainable spending.
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 usually 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 granny and grandad) are helping many people buy their first home, with new research from Aviva suggesting that there is a growing tendency amongst the older generation to use wealth held in their properties to assist the younger generations in purchasing their first house.
In addition to releasing equity, family members can also assist by using their savings 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 relatives 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 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 lower than would be required when purchasing outright, as the purchaser will often require a smaller mortgage for their share. For more details on government schemes, visit their Own Your Home website.
Savings accounts for mortgage deposits
Putting your cash into a savings account so that your mortgage deposit will appreciate in value until the time you are ready to put in an offer on a new house is another option.
Depending on how long you want to wait before buying a home, you can find savings accounts that will work for you in the short term, but offer small rewards, or more long term savings accounts for larger rewards. Some providers have savings accounts which offer rewards to savers saving for a mortgage deposit, such as our Home Saver account. As with all savings accounts, it is advisable to check that the terms and conditions are suitable for how you want to save.