Saving for your first home can be intimidating, but having a realistic and simple plan of action can make it feel much more attainable. The first step is to determine how much money you have to save. After evaluating how much you should save each month, you should devise a strategy for doing so. Here are a few tips to assist you in saving for your new home.
Deciding what type of house to buy?
If you’re thinking about making your first property investment, there are several things to consider, such as choosing an appropriate neighborhood. However, when making a real estate purchase, the first step is to decide if you want a new house or an old house. This matters because only after making this choice will you be able to estimate your overall budget. Here are a few pointers that will further assist you in making this decision.
- Budgetary considerations: One of the primary concerns of all house buyers is ‘pricing,’ and there is a significant price difference between a newly constructed home and a secondhand property. According to a recent article published by (Richardson 2021), a warranty will typically need to cover at least 5% of the cost of the house, with the remainder covered by a mortgage from a bank or building society.
- Added expenses: There are several other costs to buying a home such as mortgage fees, survey fees, estate agent fees, legal fees, and stamp duty. These costs can add more than 10% to the overall bill. Stamp duty is often the highest out-of-pocket expense when purchasing a home.
After deciding whether to buy a new house or an old one, you can start devising a plan to save the amount you need each month to deposit the down payment as quickly as possible. Furthermore, our website has numerous articles that can help you in saving money for a real estate purchase.
Where to invest and how to save for a down payment on a house
Making the most of every penny saved is an excellent approach to save for a house deposit. Here are a few investment ideas and saving techniques that will quickly help you collect funds for a down payment.
1) Save with an ISA
Instead of a regular savings account, consider putting your money into an ISA. ISA is an allowance offered in the UK that allows you to save or invest up to a particular amount without paying tax on your earnings. If you save a considerable sum of money, you may be required to pay tax on the interest you earn. When you save into an ISA, your savings will be tax-free. If you save into a ‘Help to Buy Isa’ or a ‘Lifetime Isa’, you may be eligible for a government bonus of up to 25% on your savings when you buy your first home.
2) Invest in stocks or bonds
You can also invest some money into bonds or the stock market. Bonds are less volatile and risky than stocks and when held to maturity, they can provide consistent and stable returns. Stocks are considered a high-risk investment, but they can also provide a high return.
Additionally, look for the best portfolio tracker to download, as connecting all of your brokerage accounts to the platform will make your life much easier. Portfolio trackers monitor all of your investment accounts on your behalf, providing you with automatic updates on your investment’s overall performance. Keep in mind that some types of investments are riskier than others, and stock market declines can take years to recover from, delaying your plans to buy a home.
3) Cut back on unnecessary daily spending
Examine your bank statement and see what you’re spending. This will help you understand where your funds are going and where you may cut back on any unnecessary spending. Identify any areas where you can save money — for example, walking to work instead of taking a cab, bringing coffee from home instead of buying one, or eating home-cooked meals instead of eating out. Doing so might help you put more money into your savings account each month.
If you’re looking for a period property or brand new homes for sale, you probably have specific requirements, perhaps more than you can handle. Take the time to research, make cost-effective decisions, stick to your budget, and be a conscious consumer.
The important points I’ve covered above should help you figure out how to save for a house deposit and ensure that you make a decision that is ideal for you.