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8 Financial Planning Tips for Home Ownership

Make plans for getting the keys to your own home.

The sooner you can get that deposit together, get the keys to your own home and start paying the mortgage - the better.

But getting on the property ladder will take a lot longer without some sort of specific financial plan to get there. So we’ve put together 8 financial planning tips to get you into your own home faster and in much better financial shape.

1 - Credit Score

Eventually you will be in front of a mortgage lender and your credit score is going to be a big factor in whether or not you will get the mortgage in the first place – and if so, on what terms. So if you don’t know your score find it out soon, then use the years you will be saving towards your deposit to improve it any way you can. Check out our credit score webpage here.

2-  Cutting back and budgeting

This is fairly obvious but needs to be emphasised again and again. If you don’t have a good grasp on where your money is going, how much you can save and how you can make cutbacks to increase your savings you may be literally adding years to achieving your goal. Download our comprehensive budget planner here.

3 – Debt

Debt costs money so get rid of it as soon as possible – if necessary at the expense of your savings at first. Debt is related to the first two points, because the sooner you can get rid of debts the better it is for your credit score, and of course all the money that is going into debt repayment can go straight into your savings as soon as the final payment is made.

4 – 20 is the magic number

Everyone has different goals and priorities – for some it may be to get out of Mum and Dad’s house ASAP, for others it may be having a good social life and scraping up the minimum deposit needed. However – as a general rule – if you can in any way see yourself getting together 20% of the likely purchase price as a deposit then go for it. It will get you much better terms on your mortgage, not to mention take a few years off eventual repayment.

5 – Use the help that’s out there

There are a range of savings vehicles you can use to get to your home-owning deal faster. One of the key ones is the Individual Savings Account (ISA). ISAs allow you to save up to £20,000 free from any tax obligations.

The government also introduced the Lifetime ISA (LISA). This allows you to save up to £4,000 a year to which the government then adds 25%. LISA savings must be used to buy a first home, or the government contributions are taken away (and an additional penalty is applied) if you cash your LISA in before you reach 60. You can apply for one here

If you opened a Help to Buy ISA, you can save up to £12,000 into this, to which the government will then add 25% if you subsequently use these savings to buy a first home.

Note that Help to Buy ISAs closed to new applications at midnight on 30 November 2019. If you opened your Help to Buy ISA before then you can keep saving into your account. You must claim your bonus by 1 December 2030.

6 – Don’t forget about the extras.

Wanting to reach your home-buying goal ASAP is understandable, but don’t get too focused on it to the exclusion of all else. For example, remember to always have an emergency savings fund of three months expenses, and remember that it’s not just a house you are saving for – you’re going to need things to put into it - so add on some extra savings for home furnishings and interiors (and don't forget about stamp duty.)

7 – Don’t go it alone

Consider going in with other people – it may be friends, it may be strangers. It might not be ideal and you will only have a share in a home instead of 100%, but sharing can be a good way to get started with home ownership (be careful to have solid legal agreements in place in case of disputes).

8 – Mum and Dad

If you are lucky enough to have parents (or a parent) that are relatively financially well-off and stable, they may be willing to lend or even give you something towards a larger deposit that will (hopefully!) be able to be paid back at more generous terms than to a bank or not paid back at all. They may also be willing to guarantee your mortgage which could make the whole process better and cheaper for you, but they will of course need to make sure that they understand what they are committing to, before signing on the dotted line.

If you're ready to start saving for your first home, apply for a Lifetime ISA here. Or if you would like more information, call 01689 891454 and speak to our customer services team.

Topics: Homes & Property, Savings & Investments

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