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Saving a deposit for a house?

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Whether it’s a first home or a house move, saving for a deposit is an important part of buying a property. With the mortgage market still fairly unstable, the best deals are reserved for those with large deposits. How do you budget and plan effectively to help you save more?

According to the Halifax House Prices Index, in June 2013 the average price of a property was almost £168,000. The majority of mortgage deals require a deposit of at least 10%, which in this case would amount to £16,800. With household budgets already stretched, it can be hard to find the funds to save for a deposit. However much you can afford to save, it can be a start towards owning your own home.

How much do you need to save?

Having a figure in mind will make it easier to save and help you see roughly how long it’s going to take. Research prices in the area you want to live and for the type of property you’re looking at. You might be surprised at the deals you find or it could make you think again about where you want to buy. When you’re looking to buy, you should take into account all the costs involved, as then you’ll be able to budget effectively. This includes legal fees, stamp duty and mortgage costs, as they can soon mount up if you’re not careful.

Start budgeting

Saving for a deposit isn’t easy and you might need to make some sacrifices along the way. Look at areas where you can save money or things you can do without: take your lunch to work with you rather than buying a sandwich, cut out the weekly takeaway, reduce your mobile phone or television contracts and look at cheaper holidays. They might not be fun, but it’ll all be worth it when you move into the house. However, make sure you don’t restrict yourself too much, as you need the commitment to carry on saving. It can take years to build up a deposit and you don’t want to give up just because you’ve made life too boring. Don’t forget to include any bonuses or other one off payments, as these can help you reach your total earlier.

Make sure your savings are working

Once you start saving it’s important to choose the right type of account. A general instant access account probably isn’t the best option long-term if you want a good interest rate. Research the market and see which savings providers are offering the best deal. An ISA will probably achieve the best return and you can currently save up to £5,760 each year into a cash ISA. The interest you receive will be tax free, so you need to think about this when comparing ISAs and savings accounts. When you’ve chosen a product, make sure you review the market regularly to ensure you’ve got the best deal. If something better comes along, don’t be afraid to move your money.

Mortgage UK

Check your credit file

If you’ve managed to save for a deposit, you don’t want to be let down by problems with your credit file. While you’re saving keep up to date with all your loan repayments, as even one late payment could stop you getting the best deals available. It’s important to have some form of credit, as otherwise lenders don’t have anything to base their decision on. However, whatever money you borrow should be used wisely and never overstretch yourself. Check your credit report regularly to make sure there are no errors and if anything is wrong contact the lender to have the details corrected.

Review your progress

The housing market can change from month to month, so you need to check how your savings are going compared with property prices on a regular basis. There’s no point saving for a specific amount, only to find that you actually need more as prices have risen. If this is the case, you might be able to increase the amount you save or review your time scales. However, it could also be that prices in your area have fallen and you can afford to buy earlier than you first thought.

Saving for a deposit is a long term commitment and you should start planning as soon as possible. The earlier you begin putting money aside, the sooner you’ll be able to afford to buy.

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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