A mortgage is a loan to buy a home. It is usually for hundreds of thousands of pounds and therefore lenders want to ensure that borrowers are capable of making repayments and this is one of the reasons they ask them to save up for a deposit. They also like a deposit just in case the house value drops. They do not want the mortgage value to be higher than the house, just in case they have to sell it, which happens if a borrower misses too many repayments on the mortgage. Therefore savings for a deposit is something that everyone has to do if they want to get a mortgage and below are some tips on how to do it.
Set a savings goal
It can be really useful to set a savings goal. Consider when you would like to buy a home for yourself and then figure out how much you would have to pay for one. Then you will be able to work out how much of a deposit you will need (a minimum of 5% of the purchase price normally). Also think about the fact that you will have to pay for other things when you move such as solicitors and removals. Once you have calculated how much you need and when you need the money by, you will then be able to divide it up to see how much you will need to save a month. You need to be realistic though, if you want to move next month and you need £20,000 then it is unlikely that you will be able to save enough. So look at how much you tend to be able to save each month at the moment as well, when you are setting the savings goal. It is good to make the savings amount high as you can save less if you have to but aiming high is much better than aiming low.
Set up a direct debit
It is well worth setting up a direct debit for the day you get paid to transfer money into your savings account. If you get this money transferred as soon as possible, it means that it will not be available for you to spend. You might be tempted to buy extra things if you see the money I your account and so moving it out will prevent that. Also, if you get interest on the savings in the account, you will benefit from having the money in there for longer.
Save extra if possible
Even if you are having a regular transfer of money into your savings account, it can also be worth trying to put extra in there when you have it. If you get a bit of extra money you can pop it into the account to boost your savings. At the end of the month, if you have money left the day before you get paid, then you can pop that into the account as well. If the account is instant access, then you can always transfer it back out again if you need it. If it is with the same bank as your current ccount, this is particularly easy.
Spend less money
If you are trying to build up a nice chunk of money, then one way to get some extra is to spend less. It sounds obvious, but some people are not sure how they could spend less. The first thing to do is to think about the items that you spend money on and which are necessary and which are not. We all spend money on necessary items such as electric, water tax and food. However, we also tend to spend money on luxury items such as charity donations, gifts, holidays, eating out and things like this. These luxury items are where we may be able to cut down our spending if we stop buying so many items. However, with both types of spending it could be possible to reduce spending by comparing prices and buying heaper items. You can do this with everything from your mobile phone supplier to your supermarket. Even if you only save small amounts, if you can save money on insurance, utilities, food, banking, fuel, phones, TV and everything else that you buy, these savings will really add up.
Earn more money
Another way to boost your savings is to earn more money. There are also a lot of options to do this. If you currently have a job then it might be possible for you to be able to earn more if you ask for a pay rise or take on more hours or work some overtime. You may even want to consider changing jobs to one that pays more. You could also earn extra money outside of your regular job. You can do this in a number of different ways. You can do freelance work or take on an evening or weekend job, to fit around your current work. You could look online for work as well. This could be more flexible as you can take on small jobs and then choose if you do any more work once you have completed that job. You may also want to try out sites which pay you for completing surveys, watching videos and things like that which could help to add to your savings but also be fun to use and easy to fit around your spare time. Some people might even choose to run a business where they can sell goods or services to make some extra money.
So you can see that you will need to be motivated to save for a deposit. You will need to work hard, so that you can save money, work harder in order to earn more and concentrate on what you are spending so that you can spend less. This can be done in stages so that you are not trying to do too much at once. However, once you get used to working more and spending less it becomes a habit and will get easier.