Financial Planning Advice For Buying Your First Home

It’s no joke. Getting onto the property ladder in the United Kingdom as a first-time buyer is really hard unless you’re a start-up that’s just been given a million-pound cheque. But for the rest of us who have to plan for the event, life presents a few challenges.

Now, while it is going to be a costly exercise getting your foot onto that much-revered ladder, it’s not impossible and with a healthy dose of expectation management combined with some sharp financial planning, you’ll soon see why an Englishman’s home is his castle.

So, the average cost of a first time home in the UK today is around £265,668 according to HM Land Registry, while the average salary in the UK is around £31,487 p.a. So here are the numbers then:

For a 10% deposit of £26,566, you’ll need to save £1106,91 every month for two years – you see the problem here. What many young people have taken to, is applying for loans to cover the deposit – we’re certain that we don’t need to tell you how much of a bad idea that is. Starting your homeowner career with that much debt presents potential problems that you just don’t need. 

The average young Brit in their 20s takes around five years to save up enough money for a deposit on a home. Five years is a long time, and the pill is even more bitter to swallow when one considers that the type of home you’ll be getting for your £265,668 is less palace and more… room under the stairs.

Nevertheless, once you’re on the ladder, within a few short years you’ll be able to start moving up it, and enjoying the privilege that property ownership brings you in Britain today.  

So here are a few ideas for you to put on your roadmap to home buying bliss.

First, get to grips with your financial situation as it stands right now. You should probably find out what your credit score is, and you can register for free at Experian, one of the biggest credit scoring agencies in the UK. While there isn’t a set ‘minimum’ score to qualify for a mortgage, the higher up the ratings you are, the easier it will be to qualify and the more favourable interest rates you’ll be able to negotiate. This could potentially cost or save you thousands of pounds over the lifespan of your mortgage. But if you can’t wait until you’ve managed to improve your credit score, you might be able to qualify for a mortgage from one of the companies that offer bad credit mortgages.

The ideal situation would be for you, (using the information you retrieve from your credit file), to devise a plan to get a handle on your short term debt as well as create a savings account for monthly contributions. You should really be aiming to save around 10 – 15% of your monthly income anyway, and then over and above those savings you should be working on saving an additional 10 – 20% of your income into a home deposit savings fund.

This means you’re looking at saving around 20 – 30% of your income, which for most young people in the UK is not just unlikely, but probably not possible. Living expenses are high, rents even higher and unless you’re going to be living at home with your parents until you’re 30 – not desirable either – it’s going to be difficult to save. But here’s the thing, nothing comes easy, and if you’re planning on getting onto the property ladder, this is very much going to be a case of delayed gratification.

Yep, welcome to being an adult.

Once you know what your finances look like and how much you can realistically save, you’re also going to have to get to grips with another reality – if you’re not buying your home with a partner or friend, you’re probably going to need to supplement your income with a second job. Now, if you’re thinking it’s too difficult or can’t be done – get all the inspiration you need, right here.

Here’s the sober truth: home buying in Britain isn’t what it used to be, it’s going to take time, discipline, and willpower to get to your goal. Here’s the motivation though, if you started thinking about this two years ago – you’d be just about ready to start mortgage shopping. So what are you waiting for? Get planning now!

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