One of the best ways to get onto the property ladder is to save up as much money as you can to build up a hefty deposit for a lower mortgage. Saving up for a deposit is not always easy though, especially when you’re renting, putting kids through school and generally trying to live a relatively comfortable life. So we provide some great tips on how to save money for a mortgage deposit.
Where to save
1. Cash ISA
By most accounts, a cash ISA is one of the best ways to save for a mortgage deposit, thanks largely to the tax-free interest. The fact that the interest is tax free makes up for the fact that the rates may be lower than on regular savings accounts. You can put away up to £15,000 in your cash ISA per year, which will go an awfully long way to lowering your mortgage and earn you low mortgage interest rates. Shop around for the cash ISA that delivers the best results.
2. Savings account
Savings accounts provide reasonable interest rates, which makes them a good way to grow the money you’re saving for your mortgage deposit. They may have certain restrictions or conditions attached to them, however, so read the fine print to make sure you won’t be penalised in any way.
You should also decide whether you want a fixed savings account or one that offers more flexibility. Fixed accounts are great if you already have a bit of deposit saved and you want to keep it safe from temptation and get better interest rates.
3. Mortgage-linked savings accounts
Mortgage-linked savings accounts are great for first-time buyers, according to the Telegraph. The terms are better for a start, with attractive interest rates and the chance to apply for a good mortgage deal once your account has been up and running for a while.
Another good option if you have a bit of a lump sum already and you only plan on buying a house in three to five years’ time is to invest in the stock market. Investments are designed to have long-term results, so you will have to invest for at least three years to see any real growth. You can choose between high-, medium- and low-risk portfolios or a combination. Talk to a financial advisor about your options. Of course, as we all know, the value of your investment can go down as well as up and you should always speak to a financial advisor to get proper advice.
How to save
Unfortunately, the only way to save money is to make some sacrifices. You don’t have to live like paupers (unless you really, really want to save a bucket load of money in a short space of time), but you will need to analyse your budget and decide where you can reasonably cut back on your expenditure. For example, if you indulge in takeaways twice a week, cut down to twice a month. If you go out to the movies once a week and go the whole nine yards with super-size popcorn, cold drink, chocolate and sweets, cut down to twice a month and get a small popcorn and cold drink only.
Commit to saving a set amount each month and put it in your budget, like you would a regular expense (utility bills, mobile contract, etc.). Treat it as non-negotiable – or as non-negotiable as possible.
When you feel you have enough money saved up for a decent deposit and favourable mortgage, contact an estate agent, like Tepilo, and start staking your claim on the property market.