1. Do the sums – what can you afford?
You may probably have a vague idea of what kind of property price bracket you are searching within. But really drilling down on the figures can help you with a savings goal and also with mortgage expectations.
To identify exactly what you’ll need to save for a deposit and what you can afford, it’s a good idea to use a mortgage calculator.
You can find these on broker websites and they allow you to see how much you could borrow and this will help you calculate the deposit level you require. Don’t forget additional costs involved in buying a home including stamp duty if applicable (first-time buyers only pay stamp duty if their property is over £425k), fees, conveyancing cost and removal.
If you need more information, mortgage advisers or brokers are always happy to help.
Once you have a clear picture of the numbers you can start looking for a property and start budgeting accordingly.
2. Work out your budget
Go through your bank statement (or statements if you are buying with someone else) and list all the essentials – bills, rent, food etc – then look what’s left.
This will help you establish how much you need to put by into savings. Check out this article about saving to help you learn more about how to do this and what to prioritise.
Once you know how much you can commit to your deposit saving fund, set up a direct debit from your current account to your savings account to transfer on payday so you can’t be tempted to spend it.
3. Find a savings account to build your deposit
Whilst high interest rates mean mortgages are currently more expensive – they do work in your favour if you are a saver.
Currently there are some really competitive savings accounts on the market as providers pass on the Bank of England base rate rises and attempt to gain the edge on their competition.
Our sister website, The Money Pages, provides regular updates of the best savings accounts on the market.
In it’s latest round up it included accounts with rates of up to 9%. So, it’s well worth taking a look.
Generally fixed-term accounts, where you lock your money away for a set period of time, pay the best rates. This is ideal if you need to save for a few years to reach your deposit.
Plus, don’t forget to check out the Lifetime ISA (more on this below) which includes a government bonus of 25%.
4. Be mindful of your credit score
Having a good credit score will not only boost your chances of being accepted for a mortgage, it may also mean you are eligible for more deals and better rates.
You can apply for your credit score via one of the credit reference agencies – Equifax or Experian, for example – and if you feel it needs improvement you have time to work at this before applying for a mortgage.
There are some tips here on how to improve your credit score but ultimately, being responsible with credit cards and bills is the best way to get the green light.
If you have a credit card, make sure you are paying the balance back each month and now’s not the time to argue over a parking ticket you think was unfair. Pay the charge and then appeal after so you don’t jeopardise your mortgage credibility.
5. Look into the first-time buyer support schemes
From the Lifetime ISA savings scheme for first-time buyers to shared ownership, there are many schemes available to help you onto the property ladder. It’s certainly worth finding out if you are eligible for any.
Lifetime ISAs provide a way for anyone between 18 and 40 to save for their first home. You can put away up to £4k per year and, as well as receiving interest from the provider, you will also get a 25% bonus from the government.
There’s the First Homes Scheme, which offers 30% discount on house prices to first-time buyers. And there’s shared ownership which allows you to buy a proportion of the property and rent the rest. This means a smaller deposit and smaller mortgage and this lowers the affordability hurdle quite dramatically.
Find out more about these schemes plus others here.
