A study from the Halifax at the beginning of 2014 found that the the average young buyer bought their home for £156,701 in 2013, taking out a mortgage of £125,758 and putting down a deposit of £30,943.
However, in London, the average deposit was £56,183 on a first home bought for £280,915.
We understand that is a large sum of money for someone to accumulate and it can be very tough to save that much money. We’ve put together a few tips for how to save money to fund your first home purchase.
We know that it can feel like just drops in a bucket when you are saving, but we hope that these tips may help you to toward your goal.
1. Ask for a raise or go for promotion. If you are not able to get a promotion, think about changing your job to a higher paying one. Use saving for a deposit as your motivation to raise your aspirations – you might just be happier as well as better off.
2. Get a second job. If you work 9-5 there are plenty of jobs in pubs, supermarkets etc that have evening hours available or get a Saturday job – retail work offers lots of opportunities for Saturday work. If you don't think you could keep up the second job long term, get a Christmas temp job, many shops hire extra temporary staff in the lead up to Christmas.
3. Start a cottage industry. Work for yourself from home to get some extra cash. Websites like Ebay or Etsy are great places to sell items from home or try a home-based business.
4. Review your spending. Look through your bank statements for unnecessary expenses, such as membership to gyms that you never visit or subscriptions to magazines you never read. Once you’ve listed all your spending and eliminated any waste look for other ways to save. Could you cycle to work instead of paying for tube travel? Could you bring lunch to work instead of buying lunch? Could you switch to own-brand supermarket items instead of buying brand names?
5. Get a tax-free ISA. As you save money don't let it languish in a low interest savings account, get that lump sum earning interest. The annual savings limit on Isas is £11,880, of which a maximum of £5,940 can be put in cash. But from July 1 that rises to £15,000 for New Isas – and savers can put the whole lot in either cash or equities or a mixture of the two.
6. Sell your unused stuff. Gather up all the stuff that you don't use and sell it. Whether you opt for a car boot sale or Ebay you can make money from your old stuff. Plus, when it comes time to move, you won't have to lug all those disused items with you, making your removal costs lower.
7. Save on petrol. If you drive a car, you can save petrol by accelerating smoothly and avoiding sudden braking. You can also save petrol by coasting to a stop as you approach traffic lights. Oh, and stick to the speed limit. Better yet, walk or cycle.
8. Car share. If you live near a work colleague, pick them up for work and ask for petrol money.
9. Check that you are paying the right amount of tax. Many people overpay tax. This usually occurs when you leave a job and are out of work for a period.
10. Use your credit card to your advantage. First, clear any credit card debt – paying interest is expensive. Then, pay your cards off in full every month. Ask the credit card company to set a low limit on your card to prevent you from racking up large debts. Get a credit card with cash back or other rewards when you use it. Better yet, don't use it at all – you'll be more conscious of your spending if you hand over real cash.
11. Get loyalty cards like Tesco Clubcard or Nectar Card to take advantage of cash back and money off coupons.
12. Review your spending on insurance and utilities. A household can save hundreds of pounds a year by switching to the best deals. Do your homework first, so you know what you currently pay and what your usual behaviour is, then use a price-comparison site to compare deals. Starting with energy, the average house could save up to £350 a year by switching to a better deal. Some of the best deals are found online.
Insurance, whether it be for your car or home, is another area where you can make savings by shopping around. Figures from the Association of British Insurers show that by comparing just five insurers you can save as much as 35% on your car insurance. To enhance savings, consider buying online and paying annually as it’s often cheaper. Paying by direct debit also tends to reduce your bill. You can also make massive savings on your phone and broadband packages.
The average home could save up to £250 a year on their phone and up to £90 on broadband.
Keep in mind, that £56,183 may be the average deposit required at the minute, but it is just an average. See an independent, whole of market mortgage broker to find out what sort of figure you need to be saving for.
Call Northfields now on 020 8799 3371 and we'll put you in touch with an independent broker who can get you started on the property ladder with some free advice.