Whilst you are immersed in lectures, essays, exams and all the excitement of being a student, owning your own home may feel like it is still a way off but it’s never too early to start making plans to enable you to invest in bricks and mortar when the time is right. Here, leading housebuilder Miller Homes provides some advice on how to save for a deposit and help you get your foot on the future property ladder.
One of the biggest challenges first-time buyers face today is getting a deposit together for a new home. This can have an impact on when young people are able to take the step into home ownership, with the average age of a first time buyer across the UK hitting 30 according to the Halifax.
Most lenders only offer mortgages to those with a minimum of 10% deposit. With the average home costing over £210,000, this means you’d need to stump up a deposit of £21,000 – not exactly pocket change!
Getting into good habits now could help you to build a nest egg that will make a significant difference when the day comes for you to start to look for your first home.
Take advantage of government savings schemes
One of the most effective ways to take the fast track to saving for your deposit would be to open one of the new Lifetime ISAs that have recently been launched by the government.
You can save up to £4,000 a year into what is being termed a LISA, and the government will add a bonus on top of 25%. If you paid in the maximum amount each year, then your £4,000 would be boosted to £5,000, and that’s before interest and growth.
The first bonus is paid annually in the 2017/18 tax year, then monthly from April 2018, so if you are looking to buy a home before April 2018, this would not be a viable option for you. You must also be under 40 when you open the account. In all other cases, however, you would be hard pushed to find an easier way to boost your deposit fund.
Make sure you do your research however as you can only spend the funds on a house if you have never owned a home previously.
If you don’t spend it on property, there is the option to leave the money in the account and withdraw it once you are 60, as the Lifetime ISA is designed to incentivise saving towards retirement.
You can find a lot of information about LISAs on the government’s official website for the scheme. A Help to Buy ISA is also available, offering similar returns, with different terms and conditions.
The Help to Buy Equity Loan is another great option. This is a Government-backed scheme to help buyers secure a mortgage on a new build home. It means that home buyers who meet the qualifying criteria can benefit from a government loan towards their new home.
Help to Buy helped one young couple get the keys to their dream home. Chloe Johnstone, 18 and Callum Rey, 22, saved hard to get together a 5% deposit, and then used the Help to Buy Equity Loan scheme to purchase their three bedroom Miller Homes property in the Stretton Glen development in Great Glen, Leicestershire. This enabled them to arrange a 20% equity loan from the government, securing a mortgage on the remaining 75% of the home’s value. The terms and conditions of the scheme differ in London and Scotland from the rest of the UK, so it’s worth familiarising yourself with what is available in the area in which you are buying.
The couple are now all settled in and would urge other would-be first time buyers to consider all of the options available to them when saving for their first home.
“If there are other young people looking to buy, I’d definitely recommend starting a savings account, and finding out about all the offers available,” said Chloe.
One of the benefits of buying a new build property direct from the homebuilder is that some offer attractive financial incentives when you purchase a new home.
Examples of this include the Miller Homes Deposit Match scheme*, where the company will match your deposit of up to 5%, whilst the Family Deposit scheme** provides a lump sum equivalent to 5% interest over 5 years to a family member contributing up to 20% for a deposit for your property.
Offers may only apply for certain developments and homes, and not all companies will offer incentives, so again it is worth doing your homework if you are hoping to benefit from offers such as these. Also, check with the developer for specific terms and your eligibility for such incentives.
Set up a dedicated savings account
Trying to save money in your current account will never work – it is all too tempting and accessible to dip into it on a night out or at the end of term when money gets a bit tight.
If you’re able to save more than you can put into a LISA or you’d prefer another option, then it’s a good idea to open a dedicated savings account. If it is instantly accessible, consider if there’s a way to prevent yourself from drawing money out at times of weakness – leaving the details with a trusted friend or relative, for example.
Make sure you shop around when opening a savings account, as there are a range of different options out there, all offering different returns.
Try to set up a standing order to automatically transfer a manageable amount each month into your savings account. It’s more reliable than remembering to make transfers yourself, you’ll soon see your deposit growing and chances are that you will get used to it going out and probably won’t miss the money. You may even be able to convince your parents into making a regular contribution to your bricks and mortar fund.
Earn an income
Be honest – how much time do you sit doing nothing in front of the television? You could turn that time into cash by bagging yourself a part time job. This could be a couple of hours a week in local bar, restaurant or shop or in the industry in which you’d like to end up working someday – gaining some invaluable experience for your CV as well as earning some cash!
Staying in is the new going out
If you’re looking to find ways to save money each month have a look at what you are spending on and see if you can make cutbacks. If you are a student or are planning on going to university, one of the major outgoings will probably be nights out.
Drinks, dinner and the party lifestyle all come with a price tag, but they are an important part of the university experience for many. One way to ensure you don’t miss out is to arrange some nights in with friends when you might otherwise have hit the tiles – you’ll save money but still have all the fun of an evening spent with your mates.
Fall in love with pre-loved
Shopping is another popular pastime at university, and whether it’s clothes, books, music or shoes, your retail therapy can soon add up. Before you make that purchase, ask yourself whether you really need it. If the answer’s no, don’t buy it!
If you do decide to treat yourself, consider searching out a bargain instead of buying from the first shop or online store that you see something in. Do a comprehensive Google search to find the best price, and look up a voucher code on sites like My Voucher Codes or Discount Pro – you will be surprised at how much you might save. When the time comes, comparing costs online is a cost-effective way to furnish your new home, too.
If you want to actively make money online rather than just spending less, why not sell your unwanted treasures on sites like eBay or Gumtree? You would be amazed at how much your pre-loved items could raise, and having a clear out will give you an uncluttered room, theoretically making it easier to study!
However you manage to save for your deposit, Miller Homes has a number of different incentives to help you on your way to owning your dream home.