There is a lot of talk about the amount of money you need to save for a house. This article will help you figure out how much money you should start saving for your first house.
The what age should you start saving for a house is a question that has been asked many times. Some people say to start saving when you’re young, while others say to wait until later in life.
Saving for a home is difficult, but not impossible (photo courtesy of Getty/Metro.co.uk).
With the UK’s continuing housing crisis and mortgages becoming more difficult to get, young people are constantly advised to save as much as they can for a deposit in order to purchase a home in the future.
The concept is that the bigger your deposit, the better your mortgage rate, but it’s unclear when we should start saving, how much we should save, and when we should expect to reach our objective.
Most individuals in their early to mid-twenties are advised to set aside a portion of their earnings for emergencies or to build up savings for a future home payment.
But, considering how difficult it is to purchase a home these days, should we start looking earlier? Should we start saving our pocket money and Saturday work earnings at the age of 15 in order to have a shot at buying a home?
We talked with a number of mortgage and home-buying professionals to find out whether there is a “proper” age to start saving for a house and if many of us are already behind.
‘There is no right age to start saving or looking into mortgages,’ David McGrail, compliance director at firstmortgage.co.uk, told Metro.co.uk. ‘However, owing to the time it may take, I would urge anybody to start thinking about it as soon as possible.’
Though new applicants are no longer eligible for Help To Purchase ISAs, McGrail advises anybody who currently has one to make the most of it by saving up to £200 per month for up to 10 years to be eligible for a £3,000 government bonus when it’s time to buy.
There are many programs that may assist first-time purchasers. (Picture courtesy of Mohamed Hassan/Pixabay)
Many individuals have purchased a property with the assistance of their parents and relatives, dubbed “the bank of mother and dad,” but McGrail claims that this is not the only method to do so.
‘Saving for a deposit is difficult simply because of how long it may take, particularly if you’re paying rent and attempting to save at the same time, as many people in their mid-late twenties are.’
‘With home prices continuing to rise, this is just going to become more difficult.’
McGrail recommends that first-time buyers look into programs like the Mortgage Guarantee Scheme, a Help to Buy Mortgage, or even Shared Ownership, which he says “may be a terrific place to start.”
‘However, if a buyer can stretch the deposit to purchase a house entirely,’ McGrail says, ‘this is typically cheaper in the long run.’
He also advised parents to plan ahead for their children and open an ISA to give them a “head start” on saving for a deposit in the future, if they are financially able to do so.
Jason Orme, a speaker at the Northern Homebuilding & Renovating Show in November, agrees with McGrail for the most part. ‘The basic answer is that it’s never too early to start saving for a deposit for would-be first-time buyers,’ says Orme. The lower the loan to value (also known as LTV) and the better the mortgage arrangement, the larger the deposit.’
A 5% deposit may take up to 10 years to accumulate. (Photo courtesy of Getty/Metro.co.uk)
He mentioned how difficult it may be for someone in their twenties to save for a property: ‘The average income for someone in their twenties is about £26,000, leaving a monthly take home of around £1,750.’
‘After all, most individuals in this age range are unlikely to be able to put more than a couple of hundred pounds into a savings account each month.’ That’s almost 10 years’ worth of regular savings, or 150 months.’
This implies that if you can start saving as soon as possible, even if it’s only £5 a week, and gradually raise it as you grow older and your wages/salary rise, you’ll be in a far better position than your contemporaries who waited longer.
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You’ll need ten years to save the whole sum.
Regardless of whether we intend to purchase a home in the near future, we should save a portion of our salary — having a rainy-day fund is extremely helpful if anything unexpected occurs, such as a worldwide epidemic.
‘Money is much more readily spent than saved,’ says Lynda Clark, CEO of First Time Buyer Group. ‘That is why I suggest first time buyers of any age get in the habit of putting aside a portion of their salary each month in a savings fund.’
‘Success tales of purchasers in their early 20s – or younger – who have been squirreling funds aside since their paper round days,’ Clark wants to hear more about.
‘You can never be too young – or too old – to learn about money,’ she says.
The short answer is that you should start saving for a home as soon as possible.
But don’t be disheartened if you haven’t gotten started yet. We may not be able to go back in time and start saving our pocket money, but we can begin today. Don’t put it off any longer.
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MORE: ‘With shared ownership, we were able to become homeowners in London at the age of 28.’
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MORE: Mortgage experts provide advice on how to purchase a house on your own.
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The savings calculator is a tool that can help you determine how much money you need to save for a house. It also gives information on how long it will take and what the return on investment will be.
Frequently Asked Questions
When should you start saving for a house?
It is best to start saving for a house when you are in your 20s or 30s.
What is a good age to start saving money?
A good age to start saving money is when you are old enough to work.
How can I save for a house at 16?
It is difficult to save for a house at 16. You should start saving as soon as you can, and if possible, consider taking out a loan or getting help from your parents.