Looking to save for a house? You’ve got a lot of different things to look ahead to. Here are some of the most important areas to focus on throughout this process!
Know Your Budget
The first step you’re going to need to take when it comes to buying a house is understanding what you can genuinely afford to spend on a property. Sure, a home is generally the biggest outgoing that the majority of us have. Rent and mortgage payments tend to be much larger than any other payment that comes out of our bank account. But you need to make sure that you can afford to live around the actual cost of your property. First, you’ll need generally living costs around your payments, such as council tax, energy bills, water bills, insurance policies like home warranty policies, car payments and more. Then, you’ll need money to actually enjoy yourself. Sure, it may be tempting to have a nicer house, even if it wipes out your disposable income. But mortgages generally last 25 years or longer. You need to do things you enjoy – go out to eat, visit the theatre, visit friends, have nights out, purchase things you enjoy. So, make sure to set yourself a clear and realistic budget. The best and easiest way to go about this is to take the following steps.
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- Work out your total income – first and foremost, you need to work out your total income after All too many people think that their salary is their income. But tax deductions and other payments are either made before your money hits your bank account or, if you’re self-employed, you’ll need to deduct it and save it to pay yourself. Instead, you need to make sure you understand how much your take home pay is – ie. how much you actually have available to spend. Remember, the amount of tax you have to pay will depend on the tax bracket you fall into. There are plenty of easy to use online calculators that will figure out how much of your salary will be deducted for taxes and how much you’ll actually have to keep.
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- Deduct essential costs – the next step to take is to deduct essential costs. These are the things you need to pay to lead a good quality of life. Others may call them necessities or essential spends. Make sure to include things like council tax, bill payments for energy, water payments, weekly or monthly grocery shopping and any payments you may need to put out on contracts, such as car payments, insurance, and credit card or loan payments.
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- The leftovers – the money that’s left over will be split between your mortgage and your personal spending. So, you need to determine how much you’d like to dedicate to a mortgage and how much you’d like left over as disposable income to enjoy yourself each month. The figure that you’re left with for your mortgage is your mortgage budget!
Once you know your mortgage budget, there are then plenty of free mortgage calculators out there that will be able to tell you how much you’ll end up paying each month for a property of X value. Use these to determine what value property you can afford for your budget! This will then allow you to start saving a deposit, as you’ll know what size deposit you’ll need to save, and to start browsing the market for potential options.
Saving a Deposit
The next step is generally to save a mortgage deposit. This, of course, can feel pretty difficult. Mortgage deposits are expensive and it can take some time and a whole lot of determination and self control to actually save towards them. Generally speaking, the average deposit will be between 10 and 15% of a property’s overall value. There are alternatives out there. You may find a 0% deposit, or you may find that you want to put down a larger deposit in order to reduce your monthly mortgage payments. Regardless of how much you’re going to need to save, here are some tips that will help you to save it!
Open a LISA
The first step to take when saving towards a deposit is to choose a savings account. Sure, you could save your money in a regular bank account, but this isn’t generally the best idea. While a bank account will simply store your money for you, there are a number of protected savings accounts out there that will give you interest for storing your money with them. Generally, the highest interest savings account for those saving for a mortgage is a LISA, also know as a “lifetime ISA”. A LISA has a high interest rate in exchange for you building up the money in the account without withdrawing. Most LISAs will have terms and conditions regarding withdrawals made for anything other than buying a house. You could find that you incur fines or fees for withdrawing for any reason other than buying a property. However, if you’re 100% certain that you will be using your savings on a home, this is by far the best option, as you’ll receive high interest without having to worry about the fees and fines.
Saving Quickly
Next, you’re going to be wondering how to save quickly. You have your savings account set up and you’re going to want to put as much money into it as possible. There are a number of things you can do to save quickly. Here are just a few to consider.
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- Overtime – if your work offers overtime, you could take it to get some extra money each month. This overtime pay can be deposited directly from your bank account into your savings account. You won’t have to compromise on the money you’d usually spend each month. Instead, you’ll just have an extra stream of income contributing to your savings.
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- Selling old belongings – most of us have old or unwanted belongings that we simply don’t need. Why not consider selling these? This will provide you with some money that you can also add directly to your savings account.
House Hunting
Saved your deposit? It’s time to start house hunting! This is perhaps the most exciting part of the entire process, as you are getting closer to actually securing the keys to your own property. Now, before you dive right in the deep end and start actually viewing properties, it’s really important to ask yourself a few important questions that will help you to whittle down your options and only view properties that you may actually want to live in.
Do I want to live close to my workplace?
First, do you want to live close to your work? For some people, this is an essential, as they’ll want to reduce the morning and evening commute. For others, it’s not really that important. Perhaps you work from home. Maybe you’re only in one or two days a week. You may find that you simply want to get away from your work out of hours, or you don’t particularly like the area that your workplace is located within. When choosing a home, make sure to determine what your commute (if you have one) will be like and whether you’re willing to go ahead with this.
Do I want to live close to friends and family?
Another question is whether you want to live close to friends and family. If they all live in one area, do you want to live within that area? Do you want space? Do you want convenience? Would moving closer to parents help with childcare? This is another important decision that can reduce travel time or help to create boundaries, according to your needs.
Do I need to live close to good schools?
If you have children, or are planning on having children in the near future, you may need to consider living in an area with good schools nearby. Being close to good schools can place you and your children in the catchment area, guaranteeing a good placement.
Does the area have good public transport links?
Do you use public transport? If you do, you may need to consider living in areas that have nearby and good public transport links. Moving to the countryside without a car can result in feelings of isolation or an inability to get to where you want to be all the time.
Do I need somewhere with good road links?
Do you drive? If you do, you may find that you need to live somewhere that has more road links. For example, if you work in a different city, living near good motorway links can help to reduce your driving and save you time.
Is the area safe?
You may also want to look up the safety of any given area you’re considering living in. There are generally plenty of reports on crime rates and the nature of crimes committed in the area that you can look into. Alternatively, you can just check if there are any recent serious news reports associated with the area.
There really is a lot to think about when it comes to buying a home. Sure, it may feel like a long and drawn out process. But considering this is the biggest investment you’re likely to make in your life, it’s more than worth it!
We are happy to present this collaborative post to offer valuable information to our readers.
