How to start saving for your first mortgage? Where to find your first deal? How to apply?
L&S Accounting can help answer all these questions for you and support you throughout your buying journey. This blog will put your mind in the correct direction because we all know saving the finances for a new house can be challenging especially for young adults.
Of course, there is borrowing options via many different national banks however, this option is not always available depending on the applicant’s credit history.
So, let’s give you some budgeting and saving tips you may find useful.
Open a Savings Account
A savings account gives you the space so you can keep your savings away from your regular finances.
In addition to this, most of the savings’ accounts will allow you to earn while you save via accruing interest. Some accounts have higher interest rates than others however, either way the customers benefit from this as keeping your savings in a regular non-interest account or in a home safe means you are missing out on a valuable earning potential.
Reduce the Deposit Amount
Check whether you can reduce the deposit you need for example, through different schemes such as the Help to Buy Scheme which has been introduced for people in need during the Coronavirus Pandemic.
The Help to Buy Scheme allows you to pay only 5% Deposit of the Value of the House meaning that it is so much easier to save this amount rather than take a mortgage loan out.
Set up a regular direct debit into your savings account considering how much you need to save / in what timescale. This avoids us forgetting about leaving that extra money on the side for the savings.
Think of a budgeting plan (or let us do this for you). There are many different types of budgeting one of which includes the 20-30-50 technique.
The 20-30-50 technique means you are managing and dividing your monthly pay in 3 sections.
50% - Needs: 50% of your wages each month should go to your needs which is your rent, bills, travel, and food expenses.
30% - Wants: You can spend 20% of your wages on the things you may want including new clothes, subscriptions, gym memberships, nights out etc.
20% - Savings: This is where the importance starts – by sticking to this rule each month 20% of your wages can go into your savings accounts.
So, to put this into perspective, if you are earning £1500 a month, £750 is you for your needs, £450 is for your wants and £300 will go into your savings – That is £3,600 you can save just from your wages alone in a year.
We can guide you into other budgeting techniques if this one isn’t for you!
Try out our 50-30-20 Calculator in the Resources Section
Create an Emergency Fund
It is always important to have a fund for emergencies and rainy days. We suggest that you create an emergency fund which will consist of three months’ worth of wages before continuing with your mortgage savings if you haven’t already got one.
There are many savings challenges you can try which will only bring in more money to the pot.
Does its sound familiar visiting online stores just to look for clothes, items, gifts you don’t really need to buy? Now try to keep the items in your basket for 24 hours before buying them. Often, clients have experienced that with time their realisation of what they need/want or both changes and half of the basket is either being cancelled or they decide to save the money instead!
The No-Spend Challenge
The No Spend Challenge as per its name, means you set a day of the week where you tend to spend the most money – and don’t spend anything! You can set these weekly, monthly, or annually.
How easy is it to spend £10? Every Friday instead of spending that £10 on your weekend takeaway, put it in your savings!
The Nickel Journey
The Nickel Journey has been going on for years upon years firstly starting in the United States (hence its name). Every day of the challenge you set aside more money i.e., on day 1 you will send 0.1p. into your savings account, on day 2 0.2p. and so on. By day 365, the last amount you are putting aside is £3.65 with £667.95 in your savings account just from adding the pennies each day of the year.
You can up this challenge by increasing the amount each day by 5% instead of the pennies.
Consider your Living Arrangements
Living with parents, sharing the rental expenses with another person, or living in a shared accommodation (i.e., renting out a room) are all ways of saving money each month on the rent.
Most shared accommodation options offer the bills and broadband costs included in the monthly costs.