Create a savings strategy to help you move
Saving the money to buy a new home relies on more than simply cutting out the occasional takeaway.
First, it’s a good idea to set a goal with a realistic timeframe, using the guide costs at the end of this article.Then you need to get your money into a place where it is growing as soon as possible. Even if it’s just a little bit, it’s good to get into the habit.
You’ll need to commit to the idea that you are going to start paying into your pot regularly – ideally by a regular bank transfer- and that it mustn’t be dipped into. You also need to promise yourself that any extra money you might receive, such as bonuses, goes into the pot.
With interest rates at an all-time low of 0.25%*, the main question you will now need to ask yourself when saving for a new home is should I put my money in a cash account or should I invest?
Saving means putting money away in a safe place like a high street bank or building society. The usual aim is to use the money to save for something in the short-term such as a summer holiday, or for a rainy day. Investing means putting money into investments such as shares or bonds – with the aim that its value will grow over time and you may make more money as a result.
Investing is a long-term strategy, where gains over time generally outweigh short-term dips to give a better return than a savings account would. However investing carries a greater level of risk than saving, as there’s no guarantee that you will get back the money you originally invested.
Save for a Deposit with Click & Invest
If you’ve got at least three years to save for a deposit, then investing can be a good way of making the most out of your money.
With Click & Invest we’re making investing as straightforward as possible by providing a simple online service that’s available to everyone with £10,000 or more to invest.
We don’t just track the market, we aim to beat the market, to try and get higher returns for our clients’ money. However, it is important to remember that your money can go down as well as up, and therefore it is at risk.
If you were hoping to buy a new home within the next three years, investing mightn’t be right for you as you could lose some of your money in the short term.
That’s when a savings account might help, though it’s worth bearing in mind that when you put your money into a savings account, it is at a fixed rate and will never earn more than that fixed rate.
So deciding whether to save or invest is very much a matter of how much time you have, and of course your attitude to risk.
The information contained in this article does not constitute advice and the steps referred to may not be the same for all property purchasers; therefore we strongly recommend you seek professional guidance from your independent advisor before taking any action.
|Deposit||The mortgage deposit will normally be between 5% and 20%. This can include any equity you have built up in an existing property.
Approximate Cost: £10,000 – £50,000
|Stamp Duty||For any property in England worth over £125,001 you will have to pay stamp duty. The rate is tiered but if you are buying a house worth £350,001, you will normally have to pay 2% on the first £250,000 and then 5% on the remaining £100,001.
Approximate Cost: £1,200 – £15,000
|Mortgage Valuation||Your mortgage valuation is carried out by the mortgage lender to ensure the property is worth the same as the loan being offered.
Approximate Cost: £150 – £500
|Homebuyer Report||The mortgage valuation will not tell you about the condition of the property so you will need to conduct a survey by an independent surveyor. There are three types available:
Home Condition Survey – a basic review made mainly for new build properties
Homebuyer’s report – a more comprehensive report which will look at the state of the roofing, wiring etc.
A structural survey – an even more comprehensive report: good for old, listed or damaged properties.
|Local Authority Searches||This could include checks to review drainage in the area or to check if there are any new roads in development.
Approximate Cost: £200 – £400
|Mortgage Fees||All lenders will have fees that include Booking, Arrangement and Admin fees. These can differ quite significantly depending on your mortgage provider and some arrangement fees can be included as part of the regular mortgage repayments.
Approximate Cost: £1000 – £2000
|Legal fees||A solicitor will manage a number of elements of the property purchase including the Local Authority Searches, the transfer of funds and the payment of stamp duty. Again, prices vary depending on what solicitor you choose.
Approximate Cost: £500 – £1,500
|Insurance||Mortgage lenders will require you to have buildings insurance. This will generally cover any damage to the structure of the property through fire, floods or storms.
Approximate Cost: £200 – £600
|Moving Costs||This may include hiring a removal company, renting out a van or purchasing any essential new furniture.
Costs: Between £150 – £2000