Lincolnshire Credit Union Blog

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The Lincolnshire Credit Unions top tips for first time buyers

Date added - 24 May 2016

Buying your first home is one of the most stressful and biggest challenges you will face in your life. It will take a chunk out of your wage and it will probably take you years in order to save and afford your first property. However, there are ways that can make the process much smoother and less stressful.

Tackling your deposit
Before you can even think about the total cost of the house you need to first look at paying for the deposit. These days a typical deposit will be around 10% of the overall cost of the property. Therefore, if the property you want to purchase costs £100,000, you typically require a deposit of £10,000. However, there are government led schemes that are allowing first time buyers to get a foot on the ladder with as little as a 5% deposit. The ‘Mortgage Guarantee Scheme’ makes it possible to purchase property under £600,000 with a 5% deposit.

Be realistic, can you afford this?
You need to be realistic when buying your first property. You might be tempted to go for that five bedroom house with a double garage and a view of Lincoln Cathedral but would you realistically be able to afford this, especially if it’s you moving in on your own. We all want the best but think about how you could afford to live in your new house. You need to take into account the cost of furniture, heating, electricity, food and much more. Go for something convenient; if you’re moving in on your own you don’t need any more than two bedrooms.

Save, save, save!
One of the most important things to do when buying your first property is to save as much as possible. The most effective way to do this is to sit down and take a good look at how much money you have coming in and how much you are spending. Remember that your end goal is a challenging one so a fair proportion of your earnings should be going towards saving for your property. This means limiting your spend on luxury items, holding back on nights out and maybe swapping the beaches of Crete with the seaside of Skegness.

From what you can save per month, work out how long it will take you to save what you need. For example, if you are trying to save £8,000 and you can afford to save £400 per month, then you are looking at about 20 months or just little under 2 years. Don’t be disheartened by how long it might take to save, as philosopher Lao Tzu once said “A journey of a thousand miles must begin with a single step”.

Using the ISA Scheme
A new scheme called the ‘Help to Buy ISA’ is being offered by banks and building societies across the UK. This scheme is designed specifically for individuals who are saving up for a mortgage deposit on their first home. First time buyers will receive a 25% contribution from the government on top of the amount they have saved, for example, the government will give you £2,000 if you save £8,000. However, the maximum they will give you is £3,000 on £12,000 of savings in the ISA.

The maximum monthly amount that can be deposited is £200; an additional £1,000 can be deposited when opening the account, meaning that £1,200 can be saved in the first month. The scheme is only available for people aged 16 and over and for homes worth up to £250,000. Accounts are limited to one per person rather than one per home so it possible that joint buyers can both receive the extra cash!

How the Credit Union can help you
The Lincolnshire Credit Union is also here to help you get on the property ladder. We offer simple savings and affordable loans with access to our free life insurance and other schemes. If you want to save up for a deposit on your house you could save regularly from your wage into a Credit Union Share Account. You could do this by organising a standing order with your employer or you can join the Payroll Deduction Scheme if your company is in partnership with the Credit Union.

Also as a Credit Union member you will gain access to our affordable loans. If you need a little extra cash to reach your goal we could help you out. Call us on 01522 873550 or look through our website for more details.