Thanks to Coronavirus, house prices in the UK are rising. It’s hard to tell whether it’s a good time to buy a house now, or wait to see if they prices will drop or stablise. The House Price Index is a great way to see what’s going on with house prices in different areas.
But one thing is certain – it’s never too soon to start saving. So even if you are unsure when you may make the commitment, you should absolutely be saving your money already.
So here’s how to save for your first home.
What is a Mortgage?
The word “mortgage” comes from the French word “mort”, meaning death, and the Latin phrase “capitale mortis”, meaning capital or principal of death. Mortgages go hand in hand with loans. In the past, a mortgage was used to buy land, but nowadays it is mostly used by individuals to buy a home.
A mortgage is a loan given by a lender (usually a financial institution) for an individual to purchase property such as real estate, which could be residential or commercial. The lender gives the borrower funds and in return receives an interest or equity share in the property which becomes part of their security for repayment of the loan if it becomes necessary because of default by the borrower.
How Much Do I Need to Have Saved Up?
Saving up for the house is stressful. But, it doesn’t mean that you need to save up a million pounds before you can buy your first home.
The answer to this question depends on many factors (location of where you live, how much your monthly mortgage payment will be, etc..
The good news is that you don’t need an enormous sum of money to put down on your house. The typical amount to save upfront is 10%
There are other fees to take into account such as:
- Stamp Duty Land Tax
- Mortgage booking fee
- Mortgage account fee
- Transfer fee
- Valuation fee
- Higher lending charge
- Conveyancing and solicitor’s fees
- Insurance
- Moving costs
- Furnishings
- Decorating and home improvements
What Is the Best Way To Save For My First House?
Saving for your first house is not as easy as it seems. You have to create a plan and stick to it.
First, you need to decide how much you can afford as a deposit on your home. Keep in mind that the more affordable your monthly payments will be, the longer you will need to save up. You can also get a better interest rate if you can put a higher deposit down. Use a mortgage calculator to see how much you can realistically afford. This calculator allows you to see your monthly and total repayments depending on the price of your house, your deposit amount, mortgage term and rate.
Second, figure out how much money you can contribute each month and then divide that number by 12 for the annual amount of money that you will contribute (to reach this number, take whatever monthly contribution and multiply by 12).
Third, make sure that the amount of money left over after paying all of your bills each month is greater than or equal to this annual contribution until you’ve reached your target goal.
What Should Be Included in a Monthly Budget?
A monthly budget, or personal financial plan, is a great way to stay on track and get ahead financially.
A monthly budget can be a very effective way to keep your finances in order. In order to create a successful monthly budget, you need to have an idea of what you spend each month. The best thing to do is look through your previous bank statements and get a realistic view of what you spend each month.
Quick ways to reduce spending and save more money
Here are some ways you can reduce your monthly spending so you have more money to spend. When reducing your spending on something, don’t be too harsh on yourself and remember to allow yourself some money for treats or leisure activities or your budget will be too strict to stick to.
- Cut out monthly subscriptions such as Netflix, YouTube Premium, Spotify
- Reduce the amount you spend on food
- Stop drinking
- Stop buying new clothes
- Buy second hand
- Sell things you don’t use or need
- Quit eating out and takeaways
- Don’t buy a car or other things on finance
Don’t Put Off Saving for Your First Home Any Longer – Start Today!
The benefits of homeownership are many. You can build equity in your home, which can then help you save for retirement, or even give you a good amount towards a bigger home in the future.
So what are you waiting for? Start saving today!