The deposit barrier is a significant challenge for many people who wish to buy their own homes.
Saving up for a deposit can be a daunting task, especially for first-time homebuyers.
The good news is that there are various strategies and resources available to help you overcome the deposit barrier.
Here are some tips that can help.
1. Take advantage of government schemes.
The UK government has introduced several schemes to help people save for a deposit. One such scheme is Help to Buy which helps first-time buyers get a property with just a 5% deposit. You can borrow 20% of the purchase price (40% in London), interest-free for five years. Another is the UK mortgage guarantee scheme where the government offers lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to the usual affordability checks, on a house worth up to £600,000.
2. Consider alternative lenders.
Traditional banks are not the only option when it comes to securing a mortgage. Some alternative lenders may be more flexible and willing to work with borrowers who have a smaller deposit. However, it’s essential to do your research and compare different lenders’ rates and terms before committing to a mortgage.
3. Explore shared equity options.
Shared equity is becoming an increasingly popular option, particularly for those who cannot afford to buy a property outright. In the shared equity scheme, you purchase or take out a loan for a portion of the property with an equity partner (usually the lender or a third-party investor, such as the government). Over time, you can increase your ownership share until you own the property outright.
4. Save regularly and cut back on expenses.
Saving regularly and cutting back on expenses can help you build up a deposit. Setting up a regular savings plan, such as through direct debit, can help you stay on track. Additionally, cutting back on non-essential expenses, such as eating out or subscription services, can help you save more money each month. Look for ways to increase your savings, such as high-yield savings accounts or investments.
5. Consider other sources of income.
There are various ways to supplement your income to help you save for a deposit. For example, you could take on a side hustle or sell unwanted items. You could also consider renting out a spare room or garage to generate extra income.
6. Seek professional advice.
Get professional advice to help you understand your options and develop a plan to overcome the deposit barrier. A financial advisor or mortgage broker can help you assess your financial situation and recommend the best strategy to help you achieve your home buying goals.
Overcoming the deposit barrier requires a combination of strategies, including the ones shared here.
With persistence, determination, and a solid plan, you can achieve your dream of homeownership.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.
This information does not take into account the objectives, financial situation or needs of any person.
Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.