Posted: 14 April 2014 by Higgins Homes
It is no secret that first-time buyers have been hit hard by a recession that stopped banks from lending and companies from hiring. As house prices fell, the cost of the deposits went up and the fight for getting a decent mortgage on a first property has proved near on impossible. There are however, many ways in which buyers can save up that all-important deposit, without being on a generous salary or asking the parents to help out. The first and most important thing to remember is to start saving as soon as you can. There is absolutely no reason to put it off, even if you have no idea when and where you want to buy, and there is truth in the old adage 'every little helps.' The trick is knowing where to put your money and when to move it.
Whilst interest rates remain low, some accounts will be far better than others so do some research and see where you can get the best deal. If you are planning to save over a short period of time then savings accounts are most likely to offer the best rates of interest. They generally require you to pay in an agreed amount each month for about a year, during which time you will not be allowed to make any withdrawals. More often than not, you will have to have your current account with the same provider. For longer term saving the most ideal option is to get started with a cash 'Individual Savings Account' (ISA).
The interest on these is tax-free. Unfortunately, there is also an upper limit on how much you can put in there, which currently stands at £11,520. However if you are saving with another person then each of you can have your own cash ISA. There are two main types of ISA: fixed rate and variable rate. Be aware that with a fixed rate you usually have to pay a lump sum on the outset that cannot be added to, and withdrawals are rarely permitted until closure of the account. Before you start panicking it is worth doing some basic maths to work out exactly how much you need to save. These days the average house price stands at around £170,000 and the minimum deposit required by lenders is 5%. Therefore you will need to save at least £8,500.
Generally speaking, the more deposit you can put down, the better chance you have of finding a lower mortgage. However this can be near on impossible, especially in areas where house prices are significantly higher. If you are looking at purchasing a new build home then it is worth considering properties included in the Government's Help to Buy initiative. You only need a 5% deposit with a 75% mortgage. The rest is subsidised by an equity loan from the Government, repaid at any time or through the sale of your home. This scheme has many benefits and is open to all new homebuyers, not just first-time buyers.
Higgins Homes has several properties available under the Help to Buy initiative take a look on our developments page.