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People are usually classified as first-time buyers when they are purchasing their first main residence. But before you can buy your first home, you’ll need to save up a deposit. According to the Money Advice Service, generally a deposit is usually between five and 20 percent of the cost of the home.
The Money Advice service states a deposit of more than five percent will “give you access to a wider range of cheaper mortgages available”.
But in addition to a house deposit, there are a number of other costs associated with buying a home which need to be taken into account.
When buying a home, you may have to shell out on survey costs, solicitor’s fees, moving vans and insurance, for example.
Although it sounds like a lot to pay for, there are plenty of easy steps you can take to start building up enough cash to purchase your first home.
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Savings tips for first-time buyers
Pauline van Brakel, Chief Product Officer at money app Yolt, told Express.co.uk there are “small easy steps” people can take when saving for a home.
She said: “Saving to buy a house can often be daunting.
“In many cases, not only do you have to save for the initial deposit, but you’ve also got to budget for legal fees and surveys.
“And that’s before you even start to think about paying for the additional moving costs, such as van rentals, cleaners and new furniture.
“On top of these fees, the current economic environment can make buying your first property seem impossible.
“However there are still plenty of ways to save and the key is starting as soon as possible, with small easy steps.”
One tip Yolt suggests is making sure to get the right savings account.
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A Lifetime ISA (LISA) can be used to save for your first home, but it is also an option for people looking to save for later life.
People over the age of 18 and below the age of 40 can open a LISA, and they can put in £4,000 per year until they reach 50.
The Government will add a bonus of 25 percent to a person’s savings, up to a maximum of £1,000 per year.
You can only withdraw money from a LISA if you are buying your first home, are aged 60 or over or are terminally ill with less than 12 months to live.
If you withdraw money for any other reason, there is a withdrawal charge of 25 percent usually.
However, the charge is currently 20 percent, and will remain at 20 percent until April 6, 2021.
Richard Pearson, director at EQi, told Express.co.uk: “Moreover if you are planning to buy your first home with someone else who has a LISA, you can use the combined savings to purchase the property.
“There are some terms and conditions to claiming the bonus as one might expect.
“The maximum value of your first home cannot exceed £450,000, you cannot have owned a property previously and you must have made your first contribution at least 12 months prior to accessing it for a house purchase.
“Failure to comply will incur a 25 percent penalty, meaning you’ll not only lose the bonus but could get back less than you initially invested.
“Should you become seriously ill, however, and have less than 12 months to live, you can withdraw and retain the bonus without penalty.”
Another tip worth taking into consideration is to explore and know your options when it comes to buying your first home.
Ms van Brakel added: “If ‘traditional’ home ownership seems out of reach, you could explore some of the other options out there.
“If you’re currently renting a council house, you might qualify for the governments Shared Ownership scheme, or see if you can find a home with the Help to Buy initiative, where the government will give you a loan towards your house deposit for a number of selected new-build properties.
“The scheme, which was set to close on the 31st of March 2021, was extended in the summer by 12 months and will now run until March 2022.”
Other tips include tracking your spending, and setting up a savings goal and trying to stick to it every month.
Additionally taking the time to review your direct debits could be an easy way of saving some cash.
Ms van Brakel added: “Taking a close look at your bank accounts and checking all of your direct debits and subscriptions can be a great way to save.
“You never know, you may stumble across direct debits that you’d forgotten about.”
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