Save a deposit for your first home in just six months

Peter Edmonds, independent mortgage advisor at Central Financial Services, discusses how first time buyers could save a deposit and purchase their first home in much less time than money househunters think:

“First time buyers have had it tough in recent years haven’t they? We are constantly hearing of a whole generation shut out of the property market thanks to sky-high deposits, strict lending criteria and an increase in living costs, meaning saving is never an option. Many have cried out to the bank of mum and dad whilst others have assigned themselves to a lifetime of renting, but is buying your first home really an unachievable dream?

“Raising a deposit remains the main concern for the majority of first time buyers and with the average deposit in the West Midlands now standing at £26,000 this comes as no surprise. For many the thought of saving this vast sum seems completely unachievable but what many first time buyers don’t know is that by purchasing a new build home and using one of the government’s schemes they could reduce this cost by approximately 75 per cent.

“Under both the government’s equity loan scheme, FirstBuy, and the mortgage indemnity scheme, NewBuy, purchasers need a deposit of just five per cent (you would still own 100 per cent of your new home). At Crest Nicholson’s Park Central development in Birmingham city centre, for example, these schemes help reduce the required deposit to just £5,850 for a one bedroom apartment, marking a significant saving off the typical 20 per cent deposit which would be £23,400 for the same property. For many, a five per cent deposit is much more achievable and what’s more, it may take much less time than you originally think to raise this amount – in fact there’s the possibility that you could purchase your first home in just six months.

“The first step is to sensibly review your incomings and outgoings. For instance a couple saving for a deposit and currently living in rented accommodation in Birmingham city centre, paying £300 each for accommodation per calendar month, would need sufficient disposable income to put away approximately £500 each every month. This may still sound a little far-fetched but the key is to review what outgoings are essential and what you can live without. For example, do you grab a coffee every morning on your way to work? Removing this from you daily routine could save nearly £100 each month. Additionally, just having one car per household could result in a saving of £60 on insurance and £125 on petrol costs. Replacing a gym membership with outdoor runs, quitting smoking, replacing your normal shop with ‘value’ equivalents, and recycling an old outfit for a night out could save a combined cost of £300 – thus making that monthly saving of £500 much more obtainable.

“As well as helping to lower the deposits needed, the government has also taken pro-active measures in helping first time buyers to secure a mortgage with its First for Lending scheme. Best buy mortgages are being offered at record low rates – even for those purchasing with smaller deposits – as lenders take advantage of the £80bn being provided by the Bank of England to pass onto borrowers. Of course, the best rates are still reserved for those purchasers with big deposits but things are certainly looking up for those further down the property ladder, meaning this could be the perfect time for first time buyers to start hunting for their dream home.

“Set realistic goals, familiarise yourself with your options and take advantage of the help out there – owning your own home is achievable, and in much less time than you might think!”