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Saving for a deposit

I just had the most unbelievable dream.

I’d just bought my first home… then I woke up.

As a 21 year old student who occasionally strolls into the world of paid work, it can seem the dream of buying your first home will stay just that: a dream.

Paying rent and saving for a hefty deposit can seem like an impossible task.

Here are the parts that are difficult to digest:
• The average house price is £217,5021
• Average salary for people aged 22-29 is £20,9002

Most lenders will only give you a decent interest rate if you can stump up a 25% deposit. So working on the average figure above, you would need to provide £54,375.50 in cash… ouch. And don’t forget solicitor’s costs, valuation fees and stamp duty...oh, and then you might need some furniture.

On the average salary, your take home pay would be £1,458 per month, meaning the average person buying an average house would only have to wait just over three years before they could get their average little feet on the property ladder! As long as they don’t pay any bills, eat, travel, buy anything or have a social life that is.

Okay, so now I’ve made you feel even worse about your financial situation, let’s look at the very real solutions available. There are ways that don’t involve you turning into a hermit, I promise. The way I see it, there are a few ways you can go about this:
1. Choose a cheaper property
2. Save more money
3. Get a mortgage for a lower deposit
4. Buy with a friend, partner or sibling

Sadly these days, the words ‘cheap’ and ‘property’ don’t often appear in the same sentence unless you have your eye on the shed at the bottom of the garden, so that leaves options 2, 3 & 4.

Save more money

To save more money, you need to reduce your spending, earn more money or make what little you can spare work harder. Reduce your spending by:
• Shopping around for the best rates on your household bills
• Reducing your rent:
- Moving home (or going back to mum & dad for a short while you save, but do make sure you don't nick dad’s beer, otherwise you may find yourself back on the rental market again)
-Going into shared housing
-Becoming a property guardian, meaning you look after unused properties for little or even no rent
• Reducing travel costs by moving closer to work
• Make your money work harder by investing in savings accounts that maximise the return on your investment

Get a mortgage for a lower deposit

Many lenders offer 95% Loan to Value mortgages but borrowers will find themselves with little choice but to accept an interest rate that make monthly repayments a tight albeit affordable, squeeze.

The Family Mortgage from the Family Building Society offers a 95% Loan to Value mortgage that allows time buyers to benefit from a reasonable interest rate with only a 5% cash deposit. The way it works is quite simple. In a nutshell, the borrower provides a 5% deposit and the family (could be mum & dad, or grandparents for example) contributes 20% via security through their own property equity or savings. After 10 years the security is released back to whoever provided it – it also means there is no need for family members to gift money.

So please, keep dreaming of your first home but don’t be disheartened. There is hope. There are things you can do to help make that dream a reality.

1 http://landregistry.data.gov.uk/app/ukhpi

2 https://www.slideshare.net/statisticsONS/young-people-in-the-uk?qid=ca05d9a5-1905-439e-b286-4838f215857a&v=&b=&from_search=1

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