How to get your savings in order and buy your first home

Once a rite of passage for most people, the milestone of buying your own home has since become an increasingly difficult venture. If the first thing you think of when I say ‘property ownership’ is ‘don’t be ridiculous’, then you aren’t alone. Home ownership amongst 25- to 34-year-olds has more than halved in the last 35 years in some regions of the UK. But owning your own home can give you financial security, stability and for most it’s also your most valuable asset.

The good news is that, if it’s something you genuinely want, getting on the property ladder may be far more achievable than you think. The trick is to fully understand all the options and have a plan for how you’re going to achieve your goals. And the best bit is that we’ve put that plan together for you, making your part even easier.

Here’s exactly how to get closer to owning your very first home….

1. Work out your priorities

The first thing to think about is how much of a priority you want saving for a home to be.

Maybe you’d like to buy in 5 years, or 10 or maybe you want to own by the time you’re 50. Maybe it’s not a priority right now, and you’d rather travel before you start thinking about a house.

Think about what’s right for you and what you want. Try not to feel pressured by what your friends are doing or what your parents did. This isn’t about setting yourself a strict deadline but by having a timeframe in mind it makes it much easier to work out how to get to your goal (whatever that may be).

Or, maybe buying a home just isn’t a priority for you right now. That’s okay too. Buying a house is a big investment and can mean making sacrifices for a few years. But it can also offer you security and financial stability later in life. At the end of the day, it’s a personal decision and shouldn’t be influenced by social pressure. But equally, you shouldn’t be put off just because you’ve read in the news that ‘younger generations can’t afford houses’.

2. Get an idea of how much you’ll need to save

If you like the idea of owning a home then having a specific savings goal in mind can make it much easier to achieve your goals.

Do some initial research to find out how much you may need for a deposit on a house. Start by researching a bit about where you think you may like to buy. Have a look at websites like Zoopla and Rightmove for area guides and average prices.

Your deposit needs to be at the very least 5% of the total value of the house. So if you know average prices in an area are £200,000 then you’ll need at least £10,000 saved for a deposit. For an 80% mortgage, you’ll need a deposit of £40,000.

However, the more you can afford to save, the better. The larger your deposit is, the less you’ll need to borrow. On average, UK home buyers contribute 10% to 15% of the purchase price as a deposit. Based on average UK house prices, that’s about £22,010 to £33,015 (between £48,278 and £72,417 in London).

A bigger deposit makes it easier to pass an affordability check and get your mortgage approved, although it will take you longer to save. With this in mind, it’s never too early to start putting money away. The sooner you start, the quicker you’ll reach your savings goal and the sooner you’ll have the keys to your new home…

3. Start actively saving

Now it’s time to start squirrelling that money away.

Assess your current spending and put together a budget to help you work out how much you can save each month. Depending on how much of a priority getting on the property ladder is for you think about what changes you can make to your lifestyle to save more. Find more tips on this here:

If you save £200 a month it will take you just over 4 years to save £10k. Now that’s much less scary than you thought, right? To save £40,000 you could save £300 for 11 years. It’s not quick but that’s not too overwhelming a figure for many. If you split the deposit with someone else it becomes even more achievable.

Don’t forget, you’ll also need to save for the fees - these can really add up so it’s better to be prepared

4. Make your savings work harder and make the most of the help available

If you’re doing the grafting and saving money you want to make sure your savings are working as hard as you are.

As a deposit is likely to be a short or medium-term goal, and unless you already have a lump sum to put away, you’ll need an account that let’s you start saving with a low figure and from which you can withdraw the cash relatively easily.

Regular savings accounts and cash ISAs are often good options. These accounts tend to give the highest interest rates, but you’ll probably have to commit to paying in a set amount each month. You’ll also have to pay tax on any interest earned. By contrast, the interest on an ISA is tax-free. Find out more about the types of savings accounts in our article.

Make sure you review where your savings are held once a year to make sure that you’re still getting the best rates. When you’re closer to buying you’ll need to make sure your deposit is easy to access. The housing market moves quickly so if your money is tied up you could miss out on your dream house.

The Government have also set up several different schemes, such as shared ownership schemes and Help to Buy, to help first-time buyers get on the property ladder with smaller deposits. Find out more about these schemes here.

5. Get the rest of your finances in shape

The next step is to get your other finances in shape.This includes your credit score, your accounts and your debts. read the next article in our series to find out how to do this….