Saving for a House

As confidence in the housing market has returned to the UK, particularly in the cities and towns of the south of England, so the price of property has risen. With so many foreign investors jumping into the housing market, especially in London, it has become harder for many aspiring first time buyers to get up a rung on the housing ladder. As a result, many people have resigned themselves to remaining in the rental market. However, there are some things that can be done to help the situation, but it may be that you need to think in a more radical way or to accept that there may need to be a compromise or two on the way.

Having said that, the best way of saving for a house or a flat is to simply get started on it. Set aside a specified sum each and every pay packet or salary payment as the money hits your current account. It is no use spending your money on the essentials - rent, council tax, utility bills and groceries - to then see what is left over for other things like eating out or entertainment as well as saving. You need to decide to set a proportion of your disposal income over to savings and tuck it away before you are tempted to spend it on something else. By getting into the habit of saving you are much more likely to afford a mortgage that is realistic with your earnings in the future.

Help Is At Hand

When the government brought about the Help to Buy scheme - which offers borrowers a loan guarantee for up to 95 per cent of the property's valuation - it still left the onus on borrowers to have already saved five per cent of the capital cost of their home. For first time buyers in many parts of the country, five per cent of the cost of their home is a realistic thing to save, depending on the size of the property being bought. However, in the more expensive regions in the UK and especially in the capital, even saving for deposit at this level which will allow access the scheme is not that feasible. In some locations, borrowers have to have very large incomes to be able to afford even very standard homes, under the scheme. In the north east of England, for example, the first time property cost is a little in excess of £100,000 on average. This means that they might need to have set aside a nest egg of between £5,000 and £6,000 to get a mortgage. Under the Help to Buy scheme's qualification rules, the borrower would also need to earn £20,000 per annum. On the other hand, in London and parts of the south east, the average first time house is much pricier at around £256,000, requiring a deposit of about £13,000. Although help is at hand to secure a mortgage with this level of deposit - assuming it has been saved - the government rules state that the borrower in question would need to earn well over £50,000 per year to qualify, something that is unrealistic for many people.

What Else Can Be Done?

The alternative to relying on a 95 per cent mortgage to secure the home of your dreams is to save for a larger deposit in the first place. Remember that younger people can often secure mortgages over the longest periods - sometimes in excess of 25 years, even today. At the moment interest rates are at record lows but they may well go up in 2015, so saving for a larger deposit means less reliance on borrowed funds in the future. The point is that the more deposit you have, the less you need to rely on government schemes or the mortgage lender's willingness to make a loan to you. Remember that the deposit you save is usually viewed by the mortgage lender as a proportion of the overall value of the property, with five per cent being something of a threshold. If you are finding that it is taking years to get your savings to a suitable size for a deposit, then consider adjusting the type of property you are looking to buy. Instead of looking for a two bedroom apartment, could you make do with a one bedroom flat instead? Could you live a bit further away from the motorway junction or the railway station to make it that bit more affordable? Also, ask yourself if you could relocate to a cheaper part of the country where your savings will go that much further.

Professional Fees

The asking price of a property is just one thing you need to consider, when saving. Along with your mortgage deposit remember to take into consideration professional fees that you will have to fork out for. These include things like surveyors fees, usually required by mortgage lenders, solicitors' charges and even moving companies' fees.

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