DO NOT GROW UP BEFORE YOU’RE GROWN UP
Adulting is trying enough without making life harder. When you are young, there are definitely things that you can do to help your future self out. One of those things is staying in the family home for as long as possible. Renting can cost three to four times more per month than a monthly mortgage payment, which is almost criminal! Rather than quickly escaping your family home in your late teens/early twenties, why not hang around for a bit longer? It might not seem like the most ‘fun’ or ‘liberating’ option especially if you lived away from home during university, but living in the family home really does have benefits! Whilst you are there, you can progress in your job and work your way up the corporate ladder to earn a higher wage. That way, you can save more money for a deposit so that you can start your independent life paying your own mortgage off rather than someone else’s.
That’s not to say that you can’t contribute while you’re in the family home. You can offer to split the bills, buy food shopping, or find other ways to help out. Another benefit to this is that you are building your family’s wealth instead of letting your money constantly leave the family.
I can appreciate that not everyone has the opportunity to stay in their family home, but if you can, definitely take advantage of low living costs for as long as possible.
SAVE BEFORE YOU SPEND
When you get your monthly wage, set aside a certain amount (that is affordable) per month. Of course, you need to take into account any bills you need to pay, food/travel costs etc. but save a good chunk of your money each month by putting it into a high interest/ISA account. This will help you figure out how long it will take you to save for the deposit you need. For example, if you set aside £600 per month, you know that in 6 months you will have £3600 and in a year, you will have £7200.
If you find that at the end of the month you have money left in your current account (after saving and paying your bills etc.) you can also save that too. If you haven’t used it after meeting all of your needs, it’s surplus money that can be transferred into your high interest account to help you reach your goals faster.
PROVE YOU’RE GOOD WITH MONEY
There isn’t a bank in the world (I don’t think) that will lend you hundreds of thousands of pounds without knowing that you are responsible and reliable with money. As such, you need to prove that you can handle small amounts of debt to increase your credit score. To do this, you don’t need to go off and get lots of store or credit cards because if you are bad with money management, it can all go very wrong! There are multiple ways to improve your credit score, for example, you can get a small loan, buy from a catalogue, get a car loan, or something as simple as have a phone on contract in your name. In addition to this, to have a good credit score, you need to be on the electoral roll, as a lot of companies will not approve finance if you are not on it.
DON’T GO CRAZY TYRING TO PROVE YOU’RE GOOD WITH MONEY
If you are bad with debt management, this will have a detrimental effect on you to the point where you end up with a credit score of zero! If you are getting credit cards, store cards or loans make sure that you are paying them off properly. Pay attention to key information like payment amounts and dates so that you don’t miss them and get penalised by lenders. You do not need fancy cars, expensive clothes and other objects – keep it simple until you are financially free enough to be able to buy things outright. Make sure you’re buying things that you need and that you’re not trying to keep up with the Joneses or ‘influencers’ that you see on social media, as it is just not worth it in the long-run. Also be aware of the fact that your outstanding debt will be taken into account when you apply for your mortgage. The more debt you have, the less a bank will lend you. If possible minimise or pay off your debts before applying for a mortgage so that you get the amount you deserve that’s reflective of your salary.
DO NOT LISTEN TO THE NAYSAYERS
There is always going to be someone to discourage you from progressing in life and reaching your goals. It is important to be able to distinguish between what is good and sound advice and what is someone projecting their own fears onto you or not wanting the best for you. Make sure you do your research and do not listen to the wealth of negativity out there. If I had told everyone I knew back in 2016 that I had £7,000 in my ISA and I was looking to buy a property on my own, as close to London as possible, that wasn’t shared ownership, I would have been laughed to scorn by many. I listened to stories of friends who were on higher wages than me desperately trying to save between £20-60k for their deposits for their forever homes (some of whom still aren’t on the property ladder to this day). Whilst they were/still are umming and ahing, I happily got myself a mortgage on a one bedroom flat at the end of 2016 with a £4,600 deposit. I refurbished it and sold it in early 2019 to buy myself a three bedroom house. If I compare the initial amount that I had in my savings to the equity released from the flat, it would be hilarious to think that I would have been able to save that amount over those 27 months (the length of time I owned the flat) and still be able to maintain a decent lifestyle. My advice is work with what you have and use it as the building blocks for your future.
GET AN AGREEMENT IN PRINCIPLE
Getting an AIP is going to be one of the quickest and easiest ways to see how much money you can borrow. An AIP calculator uses the figures from your salary to calculate your mortgage amount. It adds your deposit and considers any outstanding debt you have or any dependents (i.e. how many children you have, because they can be very expensive!) to give you an overall property purchase price that you can work with.
Most banks have an AIP calculator tool on their website that you can use free of charge which will not impact your credit rating. It can be done in a matter of minutes, yet it really is essential. Estate agents will not consider any offers on a property if you are unable to produce an Agreement in Principle along with evidence of deposit funds. AIPs do expire though, so if the time lapses and you haven’t found a property, you will need to get another one.
LOOK FOR A PROPERTY THAT MATCHES YOUR BUDGET
Property is always worth investing in. It typically yields more return than just leaving your money sitting in a bank gaining 1 or 2% interest. Even if what you can afford doesn’t meet your expectations, you do not have to live in a property forever. It is better to get on the property ladder, save money by paying for a mortgage rather than renting and letting your equity build up in the property over time. You can also force a property’s appreciation in value over a short amount of time by buying it as a refurbishment project. By controlling renovation costs and selling a property on for more money, you can reach your goals much quicker.
I am of course not a financial expert, these tips are based on my experiences with buying my first property. Hopefully someone out there will learn from my mistakes to reach their goals quicker, or find the encouragement they need to get onto the property ladder.
Whatever you are trying to achieve, I pray it works out well for you. Positivity breeds positivity, so keep putting one foot in front of the other to walk towards your goals.
Rosanna Alfonso Developments 