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In November 2011 61% of UK families owned their homes or paid a mortgage, but this fell to 59% in August 2012. On the other hand families in rented accommodation have gone up from 19% to 25% over the same period.
While household costs keep climbing, mortgage payments have actually decreased. A study by Halifax shows mortgage payments have fallen by 1.9% in the last year, and by a staggering 23% in the last four years. Although money is tight everywhere, this may be the ideal time to make the jump from renter to homeowner.
If you're looking to get on the property ladder, here are a few tips that should get your feet on the bottom rung.
Plenty of research
Research every home you look at, including house prices in the area, crime rates, developments, etc. and try and find an area where prices are gently rising, that way your home is likely to increase in value after you buy it.
Set a Savings Goal
Take the maximum you're willing to pay for a deposit, add the first month's mortgage payment, solicitor fees, moving fees, decorating costs, any new furniture required etc., and then add 10% for unexpected extras. Use money manager software to calculate how much you can afford to save monthly. Take the total figure, divide it by your monthly figure, and see how many months it will take you to reach your savings goal.
Savings & Investments
Keep your savings tax efficient by paying into a Cash ISA. Once you have money saved up, but are still working towards your goal, you can invest the money to earn higher interest. If you are a year or two away from your savings goal, consider investing in fixed rate bonds or income bonds provided by National Savings & Investments. If you would like to invest over a longer period, 5-10 years, some tax efficient methods include stocks and shares ISAs, onshore or offshore bonds, or speak to your employers about Share Incentive Plans.
Commute Frugally
Set up a car pool with colleagues who live nearby; according to research by Money Supermarket, drivers who travel on their own spend £1017 a year more than those travelling with passengers. It may take a little bit more time, but it's worth it if it helps you save towards a house. If that's not practical, think about cycling or walking to work, or look into public transport options. Bus and train companies often offer ways to save money for those that travel often, like monthly travel cards or ten journey tickets. Work out the best deal for your transport habits.
Cut back your lifestyle
Before you make any purchase, including small luxuries like glossy magazines, pay-per-view television, high street coffee or restaurant dinners, remember that every pound you spend is a step away from owning your own home. You don't have to change your lifestyle dramatically, but try cutting out one luxury every month and see how quickly the savings build up.
Make your own lunch
Ready meals and boxed sandwiches are certainly convenient, but you're paying a premium for the convenience. Make your lunches in the morning and take them in to work. You might think this won't save you enough, but a poll by officebroker.com suggests that the average office worker could save £1890 a year just by making their own lunches and bringing them to work. That's enough to get on the property ladder in a single year, and would help pay off the average mortgage six years early.
Don't rush in
If you've reached your savings goal and you're ready to look at homes, you still want to take your time. Don't worry about someone else snatching up a place you like and don't let the estate agency rush you. If you're sure you're ready, put in a low offer and aim to pay 10% less than the property is worth.
