Millennials are often derided as the ‘lost generation’ when it comes to property.
A report in 2018 from think tank the Resolution Foundation suggested that as many as one third of 20-to-35-year-olds will never own their own home.
But with interest rates remaining low and stamp duty savings still on offer for first-time buyers, it is possible for millennials to get that first foot on the property ladder.
How to get on the property ladder
Buying your first home as a millennial can be daunting, not least because of the amount of money involved.
Here are our top 10 tips for getting on the property ladder…
1 How to save for a house deposit
Saving a deposit is often the biggest hurdle you’ll face as a first-time buyer.
According to Statista, the average deposit in the UK in the first half of 2020 was £47,000, but this figure is pushed up by London’s £109,000 average and in many areas of the UK, a 10% deposit equates to a much lower figure.
Here are two big steps you can take to help save your deposit:
- Move back home while you save, meaning you’ll save money on rent and bills, even if you pay a low rent to your parents while you’re there
- Rent a room in a house share rather than a property on your own – bills in Houses in Multiple Occupation (HMOs) are usually included, too, which makes budgeting much easier
2 How to save for a house on a low income
While saving a deposit on a lower income might take you longer, if you break it down it can seem far more realistic.
Set yourself a monthly amount that you can afford to save and make sure you save it.
It might mean you sacrifice your morning coffee purchase or buying yourself lunch in favour of taking a flask and a sandwich to work, but by putting away a set amount each month, plus any additional money you can afford, you’ll soon start to see your deposit rising.
For example, if you can save £150 per month, by the end of the year you’ll have £1,800.
Up that to £200 per month and you’ll have £2,400 in a year.
Over two years, that figure becomes almost £5,000.
In four years, it will be around £10,000 – which is a 10% deposit on a property costing £100,000.
Prime Minister Boris Johnson has also pledged to encourage lenders to provide more 95% loan-to-value mortgages, giving more first-time buyers the opportunity to buy a home.
3 Use a government scheme
The government has introduced several home-buying schemes over the past few years in a bid to help buyers get on the property ladder. Those that remain available are:
- Help to Buy: This is an equity loan scheme where you provide a 5% deposit and the government loans you up to 20%, which is interest free for the first five years. The Help to Buy scheme is currently available to all buyers, but will be limited to first-time buyers only from April 2021
- Shared Ownership: With this scheme, you buy a share of a property, up to 75%, and pay rent on the rest. You can buy an increased share of the property, which is known as ‘staircasing’
4 Reduce your bills
If you’re renting a property, your rent and bill payments will almost certainly be among your biggest outgoings.
So, if you can save money on these, you should be able to save more towards your deposit.
Try to:
- Shop around for cheaper energy providers and switch
- Find a cheaper broadband deal
- Consider supermarkets’ own brands, which are often cheaper than big brand names
- Look online for voucher deals and make the most of them
- Find the cheapest petrol station in your area and use it
All of these steps can help you save substantial money when all added up – which can all be used to boost your deposit.
5 Pay off your debts
If you have debts, these will affect the amount you can borrow from a mortgage lender to buy your first home.
Try to get credit and store cards paid off before you start exploring mortgage options.
Not only will this help you maximise your borrowing potential, it will show your potential lender that you’re sensible when borrowing money.
6 Sort out your credit score
When you come to apply for a mortgage, your lender will assess you with a credit score.
Your credit score helps lenders decide if you’re a good person to loan money to, so having a healthy score can make the process of getting a mortgage much easier.
You can access your credit report at any time, and you should do so before applying for a mortgage.
If your credit score needs some improvement, make sure you’re paying your bills for things like mobile phone and broadband in full and on time. Missing payments can have a big negative effect on your score.
If you have credit card debt, try to pay it off rather than paying the minimum amount every month – this will show lenders that you can borrow money and pay it off, whereas paying off a debt slowly could indicate you have financial issues.
7 Boost your income
Even if you have a full-time job, there are other things you can do to give your income a boost and save your deposit quicker.
Why not try:
- Online shopping cashback: Websites like Top Cashback offer money back on items like mobile phones, fashion, insurance, broadband and homeware
- Cashback credit cards: As long as you pay the balance each month, using a cashback credit card for your usual spending can earn you hundreds of pounds every year
- Selling things you don’t want: Sites like eBay and Facebook Marketplace are great for selling items you no longer need
- Getting a second, or temporary job: Temporary jobs can usually be found around Christmas, whether it’s sorting the additional post for Royal Mail or working weekend shifts at a supermarket, which can also boost your wage substantially
8 Change your car
If you have a car on finance, this will affect your mortgage borrowing ability as it will be classed as a debt.
Car finance is also a regular outgoing that could hinder your saving, so consider buying an older car for cash if you have the money as this could help you save in the long run.
9 Be patient and don’t rush in
Getting yourself in a position to buy your first home can take time, so you’ll need to be patient.
Financially, it’s important you’re in a good position to buy so don’t be tempted to rush in or borrow more than you can afford as this could cause problems in the future.
10 Look at future value
It’s unlikely the first property you buy will be your forever home, so try to think ahead and buy a property that will help you take the next step on the property ladder in the future.
Buying a home that will be easy to sell and that is likely to go up in value will mean a quicker route to your next property when you’re ready to buy again.
And remember, buying close to good schools or easy transport links like railway stations will, more often than not, place a premium on your property’s value compared with others.
Further reading…
Changes to stamp duty rates until March 2021 mean buyers will pay no stamp duty on the first £500,000 of a property’s purchase price.
Find out more about the changes to stamp duty here.
