How to get on the property ladder as a millennial
We often hear it said that millennials can’t afford houses today because they spend their money on things like ‘avocado on toast’. Some of our advisers have even been told by potential first time buyers that they don’t want to ‘live on beans' for three years in order to save for a deposit. But a lot of this is driven by fear mongering and misinformation about millennials being unable to buy first homes. The truth is, millennials are buying homes - you just need to know how to find your dream home and get onto the property ladder.
How can millennials buy a house?
In reality, how much you’re willing to sacrifice depends on how quickly you’d like to get on the property ladder. If you’re happy to cut down on what you spend, then you could find a property quicker than you might think. If you don’t want to give up life’s luxuries, it’s still possible to save money and buy a house, it may just take you a little longer. But if you can be a bit creative you can still make it work.
Here are five home buying tips for millenials to help you save for a house deposit - all without denying yourself a decent quality of life.
Step 1: Take advantage of the government schemes
There are now a number of government-funded schemes to help you onto the ladder, such as help to buy and exemptions from stamp duty.
Thanks to government legislation, few first time buyers are paying any stamp duty today, saving an average of more than £2,000 on homes costing around £210,000 – the average across the country – and more than double that in London. That can mean a great saving for many first time buyers. However, we always recommend you seek independent tax advice as mortgage advisers are not qualified to offer this.
You can also get a 25% top-up on your deposit through various government schemes - such as the popular Lifetime ISA. And first-time buyer deposits aren’t as much as you might think, meaning this ‘top up’ makes it far more achievable:
Average first-time buyer price in the UK (July 2018)
So, if you want to buy a property for £208,378 - the average property price for first time buyers in England - and need a 5% deposit of £10,420, you actually only need to save £7,815 with a Lifetime ISA and the Government will ‘top it up’ with a £2,605 bonus on completion. This makes it that little bit easier to get your foot in the door, and finally own your first home.
Buying a property with a 5% deposit is one way to get on the ladder quicker than you might have first thought. However, we recommend you speak to a mortgage adviser first. This way, you can talk through your own personal circumstance to find out if this is a good option for you.
Step 2: Saving for a deposit when you earn under £25,000
This does seem a difficult task, but remember you won’t do it all in one go, so break it down into manageable chunks.
Example Goal: £8,000
Saving £5,000 over three years means you need around £140 per month.
Save £140 pcm for 3 years = £5,000
That’s roughly the average monthly running cost for a car. A holiday can easily cost £1,000, so over three years, that would be £3,000 saved.
Cutting out expensive holidays (£1,000 per year) for 3 years = £3,000
It doesn’t mean you can’t go away, you just have to look for different opportunities. For instance, you could go on ‘paid for’ working holiday or stay with friends and family who live abroad. You could even hold out for a last-minute cheap deal, so your holiday only costs half what you normally pay. And just like that, you’ve saved £8,000 in 3 years!
£5,000 + £3,000 = £8,000 deposit
And there are other ways you can save money for a house by reducing your costs, that you may not have thought about before.
Step 3: Are you finding the right deals or paying a premium you don’t need to?
It may sound obvious, but work with friends and family to find the best deals you can on the things you spend most of your money on. Utilise comparison sites to make savings on your household bills, the savings you make can be surprising, and very satisfying!
For instance, you may love a particular brand of coffee or pizza. Many of the big brands are now available in supermarkets, so you can save money by having them at home, rather than paying more for the convenience when you’re out and about. Alternatively, you may be spending a fortune on an expensive brand of food or drink. Why not try a blind taste test with friends as a bit of fun like in hit TV show ‘Eat Well For Less’. You may well discover that there’s another, cheaper product that you either can’t tell the difference, or might even prefer!
Step 4: Earn extra cash doing what you love
If you love the gym or going to the pub, have you considered working there a few times a week to earn a bit of extra money? Getting paid to keep fit or have fun in the pub without ever having to buy a drink can be a great way to enjoy life and save money.
Not only could you save yourself £50-£100 per month, but you could also end up earning this much in wages; effectively doubling what you could put towards your deposit each month. It may even mean you don’t have to scrimp at all – just earn the extra money you need to save.
Step 5: Get a banger, not car finance!
We’d all love to drive around in a brand new car, especially when there’s tempting offers of just £100 or £150 per month, but this can really hinder your ability to get on the property ladder.
Instead, look at buying a good car that will get you from A to B, without any car finance. Not only could you save more money each month towards a deposit, but it’s also likely to mean you can borrow more, as any car finance will be taken into consideration when you’re being assessed for mortgage affordability.
Looking for more home buying tips for millenials?
Hopefully these tips have inspired you to start thinking of creative ways to help you save for your first home. Before you know it, you’ll be well on your way to saving for a deposit, buying your first home, and proving the media wrong when it comes to millennials and home ownership.
For further tips, why not check out our first time buyer’s guide or if you would like to talk directly to one of our dedicated mortgage advisers. Use our online chat function or contact us by phone and discuss your mortgage options today.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.