For many people today, home ownership seems out of reach.
Between the cost of living crisis, raising a deposit, rising property prices and changing mortgage rates, there’s a number of different factors that can bar entry.
The best way to approach the situation is to properly plan ahead and start as soon as you can.
If you’re looking to get on the property ladder, here are some of the best ways to start saving for a new home.
1. Work towards improving your credit score
Your credit score, sometimes referred to as your credit rating, is a figure that acts as an indicator of how financially dependable you are to lenders.
When you apply for a mortgage, your credit score is one of the key considerations - after all, a bad credit score can hinder your chances of being successful.
So how can you improve your credit score?
There’s a few ways to go about it ranging from quick wins to planned actions. The easiest way to is to make sure you’re on the electoral roll and all of your credit accounts are registered to the right addresses.
Outside of that, you may consider opening up a new line of credit and using it for small, regular purchases, provided you’re sure you can manage it responsibly. Don’t use your entire credit as this shows reliance and don’t only make the minimum payments as this might show bad financial management.
As always, this doesn’t constitute financial advice and you should always speak to a financial professional before making any decisions.
2. Speak to a mortgage advisor
Even before you consider going through the mortgage application process, it can be a good idea to speak to a mortgage professional or financial advisor. They’ll have a good idea of what you’ll need, what you’re eligible for and the different routes to home ownership available to you.
Having a clear plan before you go any further is a good idea, it provides solid milestones for you to aim for while also giving you a good idea of which homes and locations you should be researching.
If you need support from a mortgage advisor, we have a number of external partners we work with that might be able to help you. Alternatively, speak to your bank and arrange a meeting as soon as possible.
3. Make use of family support
If you have the opportunity, accepting family support is a great way of supplementing your savings.
First time buyers, for example, often use a ‘gifted deposit’ from family members. This is ideal if you can make monthly payments but you’re struggling to establish your initial deposit.
A gifted deposit comes with several requirements.
Firstly, a document should be signed between the donor and the buyer to confirm that the money is a gift and not a loan that requires repayment. The letter may include:
- The name and address of both donor and buyer.
- The relationship between donor and buyer.
- The amount being given.
- Confirmation that it’s a gift, requires no repayment and the donor will have no stake in the property.
4. Research house prices in the area
After you’ve met with a financial professional, you’ll have a good idea of how much you’ll be able to borrow. This information - when combined with a realistic estimate of how much you’ll have for a deposit - ensures you’re making informed decisions when researching where to buy.
At this point you can start looking up house prices based on your specifications, as well as the average house prices across the areas you’re considering.
Found your dream home? Work out how much you’ll need for a deposit, baring in mind if you’re buying outright it’ll likely be between 5% and 10% of the entire value. With all of this in mind, you now have a solid goal to work towards.
5. Consider affordable home ownership schemes
Over the last decade, a number of government initiatives have emerged that are designed to support first-time buyers or those struggling to raise the necessary funds.
One of the most popular schemes is shared ownership, which allows you to purchase a share of the home and rent the remainder.
Because you’re buying a smaller share of the home, the deposit you need is much lower, meaning it’s much more accessible.
This is a great way of establishing a foothold on the property ladder and starting your journey to full home ownership.
You can learn more about shared ownership here, what the scheme entails and if you’re eligible as a buyer.
