How would you like to buy a property with a £5,000 deposit?

publication date: Jul 25, 2013
 | 
author/source: Kate Faulkner

Buying a property with a £5,000 deposit – even in London!

You would be forgiven for thinking that with all the property headlines including "first time buyers' average deposit is £60k” or “it will take 20 or 30 years to save for a deposit”, and as a result you are ‘forced’ to rent from "horrible landlords"!
 

It's a pretty grim picture for anyone trying to buy their own home, and it's enough to put anyone off bothering to save to get on the property ladder.

The good news is these figures and the time it takes to save for a deposit are often over exaggerated.

 

Ignore average property prices

There is a simple reason for this which I will explain.

In Nottingham (where I come from) most of the data used for this type of scary headline looks at ‘average house prices’ and ‘average incomes’. 


What it doesn’t do is look at the real situation ‘on the ground’.

For example, how much do people like teachers, nurses or police earn as a starting salary or a few years into working and what properties are on the market currently they could afford? 

In Nottingham, the average house price is just over £80,000. However, for most first time buyers, they can buy a flat for £50-£60k or even a two bed house nearby for £60k.

When you look at where you want to live in this way, it’s much easier to see that being able to buy is a realistic option.

Saving for a deposit


You do have to save up and this means compromising on things you spend your money on for a few years.

That isn’t new! When I was a first time buyer back in the early 1990s, I realise now how lucky I was as this was one of the most affordable times in the history of property ownership to buy.

However, I lived in Croydon at the time and despite being in a good job, I couldn’t afford to buy on my own, so I had to buy with a friend.
 

How I saved for a deposit

To save for my deposit, I hardly ever had nights out, didn’t have holidays, took lunch into work, waited for birthdays and Christmas for things like new clothes or things I needed.

It was too long ago for computers, broadband and phone gadgets for me to spend my cash on so I saved a lot of money not buying these!


How other generations saved for a deposit

Talking to first time buyers in the past:-

  • Some friends of mine had two jobs to save for a deposit in the early 1980s 
  • My mum and dad bought their first home and couldn’t afford any new clothes for two years nor did they have anything except a bed, fridge and a few chairs!
  • Another friend of mine in the 1960s who grew up in East London couldn’t afford to live there, so she moved out to Essex with her husband to buy. 
  • And, in those days, there were no other options. You bought, rented rooms, flats or if you were really lucky got a council house. 
There was no shared ownership, no ‘help to buy’ scheme, no shared equity purchases with developers and no new buy schemes.

Plan early to save to buy a house

So, it is possible to buy, but you will have to:-
  1. Move in with mates to reduce your costs 
  2. Give up nights out with pals for a year or so, and have party nights in instead
  3. Don't buy coffees, take a flask and your own lunch to work 
  4. Avoid holidays which can easily eat into £500, £1,000 or more from your savings
  5. If you own a car, see what you can do to reduce costs or trade it in and buy cheaper one
  6. Temporarily live with Freeview rather than TV/film packages 
  7. Reduce your mobile phone bill to the bare minimum 
  8. Avoid upgrading gadgets such as tablets/laptops for a few years
  9. Buy non branded clothes or wait for the sales
  10. Save money for birthdays and Christmas

If you aren’t sure all this will work, then add up what you spend your money on that you could live without for up to three years and see how much you can save.

We estimate this could be anything from £3k to £5k per year, which would be a £9k to £15k deposit.

That's 5-10% deposit for the average house price of £160,000!

Affordable homes you might be able to buy


If you can’t afford to purchase by yourself, consider:-

  1. Buying with a friend 
  2. Purchasing with investment from a family member 
  3. Buying a property and renting out a room which can bring in up to £4,250 per year free of tax
And here are some examples of properties which are affordable:-

Affordable homes in London

Affordable homes in Peterborough (45 mins from London)

Affordable homes in Nottingham

TELL US YOUR STORIES

We are sure you can find a way to get on the property ladder. If you don't know how, CONTACT US and tell us your postcode and what mortgage you can afford and we'll have a look to see what your options are.

Have you SAVED HARD for a deposit? Help others to do the same by CONTACTING US with your story or commenting below.

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