**You Need £17,000 for a First Home - Here’s How to Do It**
In the current housing market, aspiring first-time buyers in England face significant financial hurdles, with an estimated £16,850 needed for a 5% deposit on the average UK house price of £272,000. To help ease this burden, the government has introduced the "Your First Home" scheme, aimed at assisting first-time buyers in navigating the complexities of home ownership.
According to financial information service Moneyfacts, the costs associated with purchasing a home extend beyond the deposit, encompassing moving costs and legal fees, which can further strain finances. Here are four strategies suggested by financial experts to help prospective buyers start saving for their first home.
**1. Treat Saving Like a Bill**
One effective method for saving is to treat it like a recurring bill. Anna Bowes, a savings expert at The Private Office, recommends setting aside a specific amount into a regular savings account immediately after receiving your paycheck. This approach helps to prioritize savings and can lead to significant future benefits.
Choosing the right type of account depends on individual circumstances. Some high-interest accounts may require you to maintain a current account with the provider, while others may offer better rates if you can commit to locking your savings away for a longer period. However, for those without a financial buffer, an easy-access account can provide the flexibility to withdraw funds for unexpected expenses.
**2. Utilize a Lifetime Individual Savings Account (LISA)**
The Lifetime Individual Savings Account (LISA) offers another avenue for first-time buyers. Individuals can save up to £4,000 annually, with the government providing a 25% bonus, equating to a potential £1,000 per year if the maximum contribution is made. However, there are limitations; funds in a LISA can only be used for purchasing a first home valued up to £450,000, a threshold that has remained unchanged since 2017.
Withdrawals for other purposes can incur penalties, resulting in less money returned than initially deposited. The government has announced plans to replace the LISA with a new First Time Buyer ISA, though details regarding this new scheme are still pending.
**3. Start Saving Early**
Starting to save early can significantly impact the amount accumulated over time, thanks to the benefits of compound interest. Bowes explains that saving £50 a month from the age of 20 could yield around £41,000 by the time one turns 50, assuming a 5% annual interest rate. Conversely, if saving begins a decade later, the monthly contribution required to reach the same goal would more than double to £101.
Investing in stocks and shares is another option for those looking to grow their savings, although it comes with inherent risks as the value of investments can fluctuate.
**4. Explore Low or No Deposit Mortgages**
An increasing number of lenders are now offering mortgage options requiring little or no deposit. David Hollingworth from L&C highlights that some mortgages allow deposits as low as £5,000, enabling buyers to secure up to 98% or 99% of the property purchase price. While these options can make home ownership more accessible, they may not always be the most advantageous choice, and eligibility can vary.
Additionally, many first-time buyers are turning to family for assistance. A survey conducted by Nationwide Building Society found that over half of parents who charge their adult children rent are contributing some or all of that money towards their child's home purchase savings.
As the housing market continues to evolve, these strategies may provide a pathway for first-time buyers to achieve their goal of home ownership. With careful planning and commitment, prospective homeowners can take significant steps toward securing their first property.