Is the Deposit ‘Mission Impossible’? Some ways you can get a head start on the property ladder by Phil Higginson, IFA
Blue kite trapped in tree – Hamilton Park, Taunton 2018.
Without planning and discipline, saving for a deposit can be difficult. A little bit of knowledge goes a long way when planning for your first mortgage. Here is a quick guide on saving to assist with this.
What is the deposit?
The deposit is your initial contribution to the purchase of the property. You will generally need a minimum of 5% of the overall purchase price for a deposit, the larger the deposit the greater the likelihood of securing a more favourable interest rate.
How much should a deposit be?
In most cases you will need a minimum of 5% and should aim for 20%. Anything over the minimum can reduce the overall amount paid as you will get a more favourable rate. Not many people achieve 20% on their first property, but those who do pay less over the course of the mortgage.
Joint incomes?
Most properties will be too expensive for one income, but not all. There are many suitable properties for first time buyers and single income households.
How can I get that much money?
ISAs
ISA (Individual Savings Accounts) that allow you to grow funds without paying tax. With the Help to Buy ISA the government will top up any contributions you make by 25%, up to the contribution limit of £12,000. So, for every £200 you save, the government will contribute £50. This means you can earn a maximum of £3,000 from the government.
The savings shortcut
Pay tends to rise exponentially when starting work, but expenses tend to stay constant. If pay rises are put directly into an ISA, a deposit can be achieved much faster. For example, pay increasing from £15,400 to £30,000 could mean an additional £10,200 in the 2018-2019 tax year take home pay. If a significant portion of that can be placed into an ISA, a deposit for house purchase can start to look achievable.
Parental help
The bank of mum and dad can help first time buyers in a number of different ways. Our advisers can discuss this to suit individual situations.
If you have questions concerning mortgages or ISA’s please Contact Us.
Phil Higginson Director & Independent Financial Adviser
Phil is an enthusiastic and driven Independent Financial Adviser with over 25 years experience. His consultative style supports clients to achieve their financial goals. When not working Phil enjoys spending time with his wife and daughters. During the summer months when not working he can generally be found on the cricket pitch.
Is the deposit ‘mission impossible’? is an article by Phil Higginson IFA
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