It can take a pretty big Deposit to secure a good mortgage with a good interest rate. Read through our guide on how you can start planning for your first mortgage to make your dreams a reality.
Weigh Your Options
Many people would prefer to own their homes rather than rent them, but most people under-30 don’t have the means to buy them. So they rely on help from other sources, most commonly their parents. The average deposit for a mortgage is 20% of the price of the home, which can equal $20k or more. The good news is that there are options available to you:
Parents can help by giving Money informally or by arranging with a mortgage lender to act as a guarantor or offer some of the money themselves.
Buy Together with Friends and Family
You may be able to group together with friends and family to buy a home together, but keep in mind this could cause trouble if someone wants to sell.
If you’re renting a council house and have an income below a particular level (find the threshold for your area online), then you might be able to buy part of the house and rent the rest. This can reduce the cost of a mortgage, but does mean still having to pay some rent.
Help to Buy
Help to Buy schemes are offered by the government to help you purchase a new-build property. They allow you to make a smaller deposit, with the government loaning you the rest. The loan is free for the first five years, but you will have to pay the government back from year 6.
Work Out How Much to Save
Use a savings calculator to determine how much you can save. Once you have the amount of your deposit, you can come up with a plan to reach that target. How long it takes depends on your saving ability and how much you can realistically afford to save each month. If you wanted to put together a deposit of $10,000 in three years, it would require putting aside $265 a month. That sounds like a long time, but it’s better to save up properly rather than save too much and give up or put your financial security at risk.
Now it’s time to decide where to put the money. You might already have an Account that allows you to create a separate pot for your savings, or maybe you have to open up your own savings account. We recommend looking for one that has a good interest rate even if your money is tied up in the account. After all, it’s going to be a few years until you need it.
Price Comparison Websites
Comparison websites are a great way to start finding savings accounts that meet your needs. Money Supermarket and Money Saving Expert are great choices. Keep in mind that these websites won’t all have the same results, so it’s worth trying a few different sites. Also be sure to do some research into the kinds of products and features you need from a supplier before choosing one.
Watch the Money Tree Grow
Be sure to keep a close eye on your savings account. Take a good look at it at least once or twice a year to ensure you’re getting a good interest rate on your money. Try and find a cash ISA that allows you to deposit and store money without having to pay tax, but take a close look at the terms and conditions to ensure you’re getting a good interest rate.
What to do From There
You should open up your savings account if you don’t have one already. Take a trip to your bank or building a society to see what they have to offer, or shop around online to find something good. It’s worth seeing if you can reduce the size of the deposit, such as with support from friends and family, or through a Help to Buy scheme. Lastly, you want to set up regular payments into your savings account through direct debit. That way, the money comes out of your account before you even have a chance to spend it. Just sit back, watch the money roll in, and make the deposit only when you feel comfortable.