There’s no bad time to start saving towards a goal. Whether you’re starting to think about looking for a house, or it’s something that’s far off in your future.
In this article, you’ll find out that buying a house is expensive. There are a lot of costs associated with it and although you can spread most of the cos t out over time, there are some unavoidable fees which you’ll need to pay upfront.
We’ll also share some ideas that can help when saving for a house in this article.
The cost of buying a house
Before you start saving, it is a good idea to figure out the costs involved in buying a house. This way, you will have a better idea of how much money you should be aiming to put aside.
To get a house, you could buy it outright, if you’re lucky enough to have hundreds of thousands of pounds available or however much the full cost of the house is saved. For most people, that isn’t a choice, so they take out a loan called a mortgage.
This is a loan from the bank which allows you to buy a house with money you don’t have right now. The idea is that you pay back the amount you borrowed over many years. You also pay a few percent extra on top, which is the cost of getting the loan. This extra money is known as interest.
You would use your regular income, for example, from your job salary, to pay off a mortgage over a period of up to 40 years.
Some costs associated with getting a mortgage might include:
- a booking fee of £99-£250
- an arrangement fee of up to £2,000, and
- a mortgage valuation fee (£150 or more).
You can sometimes make these part of your mortgage repayments. It may be better to pay them right away and avoid having to pay interest on them.
The costs that you need to start thinking about for saving purposes are the ones that will help you get a mortgage. These are upfront costs.
To get a mortgage and buy a house, you will need some money available for different costs that you need to pay right away.
These include things such as:
- Deposit – money you put towards the total cost of a house right away, at least 5% to 20% of the listed price (for example, £5,000 to £20,000 when buying a £100,000 home),
- Land and Buildings Transaction Tax (LBTT) – a tax you pay depending on the cost of your property, first-time buyers do not have to pay money on houses worth up to £175,000,
- Legal Fees – the cost of a solicitor or licensed conveyancer to carry out all the legal work when buying your home,
- Electronic Transfer Fee – a payment of around £40-50 for the mortgage lender to transfer mortgage money to the solicitor,
- Removals – hiring someone to move things in or out of the house you have bought, you could save money here by doing this yourself or with the help of friends and family.
There may be other costs that you want to budget for as part of what you will pay at the time you buy a house.
If you want to have your own survey done this can cost between £250 and £600+ depending on the type of survey. You do not have to pay this as the seller will include one as part of a home report. There may be repairs or other work that needs to be done in the property or you might want to budget for buying new furniture and other household items.
There are costs which you will pay once you have bought a new home such as:
- mortgage repayments,
- buildings and contents insurance,
- unexpected repairs,
- council tax
- household bills – gas, electricity, water, TV packages, internet, phone, etc.
You may pay for these out of your regular income but have extra savings set aside after you have paid your upfront costs.
Read more about the costs involved in getting a house on Money Helper’s website.
Set up a Lifetime ISA (LISA)
One of the best ways to save money as a first-time buyer is by opening a Lifetime Individual Savings Account (LISA).
A LISA is a type of savings account that you can use to buy your first home or save for later life. You must be 18 or over but under 40 to open one.
They let you save up to £4,000 in a year, and each year you get a 25% bonus on top of what you have saved. This means if you managed to save a maximum of £4000 in a year you would get £1000 added to the account free.
It’s important to remember that whatever money you put into a LISA, you cannot take out unless you are:
- buying your first home,
- aged 60 or over,
- terminally ill, with less than 12 months to live.
If you take money out for any other reason you get charged a 25% fee on that amount. Only put in what you can afford to avoid this.
Other savings options
There are lots of different steps you can take to help save towards buying a home. You could:
- Set up a savings account
- Use savings apps
- Do a savings challenge every year
- Stay with family or share a flat to reduce the cost of renting
- Make the most of Young Scot Discounts and Rewards
- Budget (see below)
- Invest (see below)
Check out our article for different ways you can get your savings journey started.
If putting hundreds or thousands of pounds away isn’t something you are able to do, look at budgeting to see where you are able to save money.
Budgeting is a way to figure out what money is available to you, how you can spend that effectively and where you could make savings.
You can take simple steps such as using cheaper products or food items as an alternative. Or using a comparison site to see if you can find a cheaper deal on your phone package or other bills. Or, figure out what subscriptions you have and see if there’s anything you don’t use anymore.
Check out our budgeting page for articles that share more information on how to get started with budgeting.
Not sure what investing is? Watch the video below and let Iona Bain explain what it is and why it may be a good idea!