Are you a first-time buyer? If not, maybe your children or grandchildren are currently putting everything they have into savings to buy their first home?
Santander have revealed three ‘types’ of first-time buyer, and the chances are, whether it’s yourself, a relative, friend or colleague, you will recognise some of these characteristics in someone you know. If you do, that’s great, be sure to read on for the top tips for each group and pass them on if you know someone who will benefit.
Group 1: Minimalists
The first group are the prospective first-time buyers who are cutting back on all non-essential expenses to put every penny available toward their deposit. The research shows that two million who are making such drastic cut backs that they either have, or are willing to, replace regular meals with cheaper alternatives, such as instant noodles.
People in this group have also given up alcohol (21%), to put more money into savings and 11% have cancelled their gym membership to redirect their monthly fee into savings.
Tips for Minimalists: If saving quickly is your main priority, then you will need to focus on the type of account you are using to reach your goal. For example, the Lifetime ISA is designed for first-time buyers to maximise their savings, as all contributions attract a 25% government bonus. This means that, if you deposit the annual maximum of £4,000, you will receive £1,000 in bonus money.
Secondly, saving is important, but there is no point buying a house if you are not going to be well enough to enjoy it. Try to make sure that you are balancing the need to save for a deposit with your own needs. Making sacrifices is fine, but you still need to eat, have fun and stay healthy.
Group 2: Boomerangs
The name might give it away, but this group are considering, or already have, returned ‘home’ to save money toward their deposit. 39% of prospective first-time buyers would think about moving in with their own parents, or their partner’s parents, to cut down the amount spent on rent and household bills. These people expect this arrangement to last an average of two years, but 15% are open to the idea of staying for more than five years.
Tips for Boomerangs: If your, or your partner’s parents are generous enough to let you stay with them while saving for a deposit, it may be worth considering whether making an appointment with the bank of mum and dad is an option.
Group 3: Alternatives
We’re not talking about the first-time buyers who are still in their goth phase, but rather the 40% who are considering less mainstream methods of raising the capital to buy their first home. According to the report from Santander, potential strategies include:
- Selling shares in the property which will provide a potential return when the property is sold in the future (22%)
- Crowdfunding (19%)
- Selling guaranteed interest bonds on the property (9%)
- Selling raffle tickets with the opportunity to win an equity share in the property (8%)
Tips for Alternatives: Be careful. There are two reasons why these strategies are not yet commonly used by first-time buyers:
- They are volatile, and success is not guaranteed
- They are lesser-known and as such, untested and potentially lack security
If you are thinking of turning to unconventional ways to raise the capital to buy your first home, make sure you seek the advice of a professional before promising shares or bonds to others. You will also need to talk to a legal professional before entering into any agreements with third parties, such as crowdfunding organisations.
While we’re on the subject…
Engaging with an independent mortgage adviser will help you to more effectively plan your home buying journey, no matter how you plan to go about it. Talk to us for suggestions of ways to make your savings work better for you, advice about splitting responsibilities with older generations and top tips for dealing with more unorthodox and emerging strategies.
To get started, contact us on 02380 633636 or request a call back by clicking here.