The property market has seen volatile growth in the last few years, with the coronavirus pandemic contributing to unusually high demand and causing property values to skyrocket. Lately, it has become yet harder for budding homeowners to get on the property ladder, thanks to rises in interest rates leading to mortgages getting more expensive. What are some simple ways for a first-time buyer to approach getting on the property ladder?
Draw Up a Budget
The first step in any attempt to get on the property ladder should be to take stock of your current financial situation. This should be a comprehensive review, that looks not just at your currently monthly household budget but also at your future earning potential, and any existing debts or loan agreements.
All of the above can have a meaningful impact on your savings goals, and also, more importantly, on the size of any potential mortgage you receive. Couple your budgeting with a visit to a mortgage adviser to find out exactly what is within your means.
Eliminate Debt
But before you begin to put money aside for a new property, you should manage any existing debts you have. The interest rate on loans or credit card debt will always outweigh the potential interest you can receive on your savings, unnecessarily crippling your ability to save as a result. Pay debts first, then build up your deposit with a clean slate.
Start Saving
With the path clear to begin your savings, you can now start to make a concerted effort towards building up the money for a deposit. With the buying of property being a singular ambition, your savings approach can be targeted and specific – yielding you the best and quickest results in the process.
Start by creating a dedicated account in which to place all your savings. Since this money is going towards a deposit, and providing you already have an emergency fund available to you, you will not need ease of access to your savings. This means you can benefit from higher rates of interest and better returns over time, quickening you to your ballpark goal figure.
How you save is individual to your household or family situation. Your household budget will undoubtedly reveal the various areas from which you can save more. For example, your leisure budget could be pared back to facilitate more monthly savings, or you might be able to monetise other parts of your life to increase your income.
Help-to-Buy Schemes
It is also important to acknowledge the various schemes available for first-time buyers to take advantage of, as a form of equitable leg-up in a difficult market. For one, there is the lifetime ISA or LISA, which sees a 25% government bonus (up to £1000 per year) added to any money saved in it – providing that money is used for a first home or for retirement.
More fundamentally, though, there are schemes that directly help with the purchase of a property. For example, the government’s Equity Loan scheme assists buyers in the purchase of a new-build property by loaning up to 40% of the home’s complete value.
