If you're a first-time buyer and wondering how to get started on the property ladder, this blog is for you!
If you're a first-time buyer and wondering how to get started on the property ladder, this blog is for you! We’ll cover:
• How much deposit do you need?
• What’s the maximum property price you can afford?
• How much do you need to save each month?
What Deposit Do I Need?
There are a few special schemes out there, like Skipton’s 100% mortgage for renters or Accord’s £5,000 deposit for first-time buyers. But generally, in England, you’ll need a deposit of about 5% of the property’s value. So, if you’re eyeing a £200,000 home, you’ll need a minimum deposit of £10,000 plus fees.
What’s the Maximum Property Price I Can Afford?
With a 5% deposit, the most you can typically borrow is 4.49 times your annual income. That means your buying power is your annual salary multiplied by 4.49, plus your deposit.
How Much Do I Need to Save Per Month?
A good rule of thumb is to save one-third of your net (after-tax) take-home pay each month. For instance, if you earn £35,000 a year, your monthly take-home pay is about £2,390 in the 2023/24 tax year. Saving one-third of that (£800) each month will give you around £9,600 after 12 months, which is close to your 5% deposit.
Here’s a quick breakdown:
• Annual Salary: £35,000
• Monthly Take-Home Pay: £2,390
• Monthly Savings (1/3 of take-home): £800
• Total Savings After 12 Months: £9,600
Now, multiply your annual salary by 4.49:
• £35,000 x 4.49 = £157,150
Add your deposit:
• Buying Power: £157,150 + £8,250 (5% deposit) = £165,400
Remember, you'll need some extra funds for fees like solicitors, so it's good to have a little cushion.
Budgeting Tips
Saving one-third of your income not only helps you gather your deposit but also prepares you for future budgeting. Try this: set up a separate bank account and transfer your "mortgage and bills" money into it as if you're already paying for your new home. This helps you get used to living on your post-mortgage budget.
Lifetime ISA Bonus
If you open a Lifetime ISA and save for at least a year, you can also benefit from the government bonus. It’s a great way to boost your savings!
Final Thoughts
This guide is here to help you get started, but it’s not personal advice. For tailored advice, always consult a professional.
Happy saving and good luck on your journey to homeownership!
Your home may be repossessed if you do not keep up repayments on your mortgage.
(Date: 17/06/2024 - the information contained within was correct at the time of publication but is subject to change)
