Hunting Down That Elusive Deposit

  • Raising a deposit is not excessively difficult
  • You just need to use as many methods as possible

Have you tried to raise a deposit to get on the property ladder and given up?

Are you trying to raise a deposit now and finding it a real mountain?

Raising a deposit is challenging, but it is by no means impossible.

The trick is to identify the main deposit-raising methods and then take up all of those applicable to you.

This blog sets out those main ways of raising a deposit, enabling you to choose the ones that will work best for you. And the great news is that there are many of them.

Here, at a high level, are the main ways to secure a deposit and get onto the homeownership ladder.

1. Release equity from a property owned by a relative

2. Get a lodger

3. Reduce your current accommodation costs

4. Cut out non-essential spending

5. Reduce essential spending

6. Grow your income

7. Take advantage of the Help to Buy ISA

8. Identify ways to lower the deposit needed. 

1. Release equity from a property owned by a relative

The equity in a property is the difference between what it is worth and any mortgage on it.

Taking out equity from a property is one of the quickest and easiest ways to raise a deposit.

This method may be available to you if a close relative has a property with sufficient equity to enable part of it to be released to you as a deposit.

Equity can be released from a property by:

  • Remortgaging
  • Taking out a second mortgage
  • Getting a further advance
  • Going for equity release.

If the property is free of a mortgage, a deposit-raising mortgage can be taken out against it.

2. Get a lodger

The rent from a lodger can be a great boost to your income, especially as it is likely to be tax free.

If you are yourself a tenant, it is unlikely you will be able to lawfully get in a lodger without the permission of your landlord or their managing agent.

If your rented home lends itself to accommodating a lodger, there is no harm in speaking to your landlord or their agent. Most landlords are probably likely to say “no”, but there will be some willing to say “yes”.

If your rent is say £800 per month and you can recover £400 per month by having a lodger, that will amount to an impressive £4,800 in a year.

Government help to buy (government financial help for first time buyers)
More help from the government (right to buy, right to acquire and shared ownership)
Will you be too late? (why you may miss the government’s home purchase freebies)

3. Reduce your current accommodation costs

Your accommodation costs are likely to be your biggest monthly expenditure. By reducing those costs you should gain a significant amount to go towards your deposit.

You can reduce your accommodation costs by:

  • Opting for cheaper accommodation
  • Sharing with someone to halve your rent payment
  • Opting to live rent free with your parents or other relatives.

Such steps could do anything from reducing to extinguishing your rental payments.  Your savings are likely to run into thousands of pounds.

QUICK HOUSE DEPOSIT:
50 Ways To Put Together A Deposit in 6 Months

4. Cut out non-essential spending

You can make big savings by eradicating or reducing non-essential or discretionary spending, spending you don’t absolutely need to make.

There is a huge list of items falling within this category including: cigarettes, alcohol, nights out, gym memberships, TV packages, branded clothes and shoes, holidays, cinema visits and takeaways.

Your savings are likely to be substantial, running into thousands of pounds.

Cut spending – grow deposit (raise a deposit fast by cutting your spending)
Boost income – grow deposit (raise a deposit fast by increasing your income)
Buy a property with a property (12 ways to raise a deposit using a property)

5. Reduce essential spending

Essential spending is expenditure on things like food, household goods, council tax, gas, electricity, water rates, insurances and travelling to work.

While you cannot usually remove these items of spending, you should look to reduce them whenever possible.

For instance, with gas, electricity and insurances, you may be able to source cheaper suppliers using price comparison sites.

Instead of using public transport or driving to work, you may be able to make savings by walking or cycling. 

6. Grow your income

Many people forget that saving a deposit is not only about reducing expenditure; it is also about increasing income.

Ways you can increase your income include:

  • Overtime
  • Second job
  • Setting up a simple and easy to operate home business
  • Selling unwanted personal possessions on platforms such as Ebay.

7. Take advantage of the Help to Buy ISA

If you save your deposit using a Help to Buy ISA, the government will effectively give you £50 for every £200 you save, with the maximum government contribution being a very healthy £3,000 per saver.

The scheme is available to first time buyers only. 

8. Identify ways to lower the deposit needed

This method can be seen as “thinking outside the box”. What you are doing here is looking at unusual, indirect or not often thought of ways to make deposit raising easier.

One way is to look at Help to Buy shared ownership, where qualifying buyers can purchase as little as 25% of a property, reducing the deposit needed as a result.

Similarly, participants in the  Help to Buy equity loan scheme can borrow from the government, at low rates of interest, up to 40% of the price of qualifying properties – lowering their deposit requirements.

If you choose to purchase your home jointly with another person, that could halve the amount of deposit you require.

Remember  that you can benefit from the government’s first time buyer’s stamp duty exemption if you are a first time buyer.

Conclusion

Identify those ways to raise a deposit that are applicable to you, and look to employ as many as possible.

The more deposit raising methods you use, the faster you are likely to reach your deposit target. 

Enjoyed this blog? Please share it with friends by clicking on the LinkedIn, Twitter, Facebook or Instagram icon on this page. 

Are you trying to raise a deposit at the moment? How is it going? What are the biggest challenges you face? Please leave your observations or comments below.

You may also find the following blogs useful:

Buying a property fast (wacky and wicked ways to raise a deposit)
Raising a deposit (14 common ways to bag a deposit with ease)
Mum & dad to the rescue (ways parents/grandparents can help you to buy)

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Dalton Barrett
Rebel Property Coach

Please follow me on Twitter @Dalton1London
You can find me on FacebookInstagram and on YouTube
Please link up with me at LinkedIn

My website is: www.rebelpropertycoach.com


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