5 ways to help you reach your savings goals

Is the new year making you think about getting your finances in order? Are you feeling inspired to save for your new year’s goals?

We have some top tips to help you plan for the future and save towards your 2022 dream.

Monthly financial spreadsheet:

The first step is knowing your personal cash flow and outgoings for each month, by working out these figures you can begin to assess your finances and work out a saving plan that works for you. Making a spreadsheet showing all your monthly expenses such as utilities, rent, weekly shops and an allowance for personal activities can show you what is left from monthly wages. Using this you can then decide upon a percentage of your disposable income you are able to save in a separate savings account. By saving in another account the money is separate and shows clearly what can be spent, allowing you to then budget for the month.

Bills and subscriptions:

Often, we set up lots of direct debits over many years and forget what money is going out of our accounts. Going through your direct debits is important to do regularly. Keeping on top of these will help you save money and evaluate what money you are spending and decide if they are all crucial or if there are cutbacks that could be made all counting towards your saving goals.

Alongside this, bills can often be reduced by checking if there are beneficial or more cost-effective deals out there within the supplier you currently use or checking the market to see what offers you could be accessing. Many companies have deals and prices that can be negotiated specifically for subscriptions. Speaking to suppliers and companies to talk through your personal situations can give you an idea of what they can offer, alongside carrying out online research and shopping around to find the deals and can save you more money.

Direct debit for credit cards:

Setting up a direct debit to pay off your credit card is a great way to avoid missed payments and incur additional charges. This is also important to your credit score- having a good credit score can affect your ability to access certain products such as loans and impact on your ability to borrow money.

‘No spend days’:

It can be hard to find days where you don’t spend any money but even 1 or 2 a month could make a big difference. Taking small steps can lead to larger changes in the long run. It can be as simple as no online shopping, making your lunch over buying it and staying in for the night rather than a diner out. These days often take prior planning and need to be days that fit into your month.

 

Spending limits:

 

To help you keep on track of your spending you can often set limits on both debit and credit cards. By having these set they can stop you spending more than you have budgeted for and be a back up to support your saving. By setting these limits they can encourage you to assess daily spend expenditures prior to the month ahead. Lots of banks do allow you to do this but you would have to investigate and speak to your bank regarding this.

 

Any steps to save, big or small can make a difference in the long run. Start your new year right and make the changes you feel able too today.


What is a 95% mortgage?

What is a 95% mortgage?  

Since the pandemic wiped low deposit deals clear from the mortgage market it has made saving for a deposit seemingly even more impossible.  Due to uncertainty that came along with COVID-19 lenders began to see these options as high-risk, hence why majority of them were withdrawn. The average cost of a property in the UK is around £230,000, making saving up for even a 10% deposit a daunting task for many.

To help combat this, Chancellor Rishi Sunak announced during the March 2021 Budget a new mortgage guarantee scheme that will allow house hunters to borrow up to 95% of the purchase price of the property that they want to buy. This means that the buyer will only have to cover the remaining 5% in deposit form, opening up the possibility of owning a home to a wider number of people.

Am I eligible for a 95% mortgage?

Although these new lower deposit mortgages may be especially helpful with getting first-time buyers onto the property ladder, you do not have to be buying your first home to make the most of the scheme. As long as you are looking to purchase a house with a value of up to £600,000 that you intend to live in yourself there is the chance that you are eligible regardless of whether it is a new build property or not.

It is important to understand that having a 5% deposit amount does not guarantee you being accepted by a lender for the mortgage. Buyers will still be subject to affordability and credit checks.

The scheme is intended to run from April 2021 – December 2022.

What are the advantages?

The main advantage to a 5% deposit is that potential buyers do not need tens of thousands of pounds sitting around in their bank account to get on the property ladder. As buyers are not having to save up for larger deposits it lowers the risk of housing prices rising at a quicker rate than people can save.

What are the disadvantages?

Interest Rates

The larger the percentage being borrowed of a house’s value usually results in higher interest rates. This means 95% mortgages normally come with higher interest rates than lower percentage mortgages so it can mean that saving up a larger deposit may be a better option. However, it is important to identify whether you can save funds quicker than house prices are rising.

Difficulty Remortgaging

Starting with a low percentage of equity in your home means that it can take time for your loan-to-value (LTV) to reduce. This means that it can take you a while to qualify for the more competitive remortgage rates.

Negative Equity

Holding just 5% of the value of your home means that there is a high risk of ending up in negative equity if property prices go down. Negative equity is where you owe more on the mortgage than the house is worth. As you begin paying off your mortgage the likelihood of this slowly decreases, similarly putting down a larger deposit will also reduce the risk.

Lower Maximum Loan Amounts

There is a cap on how much you can borrow with a 95% mortgage for some lenders. Occasionally there can be maximum loan amount regardless of your income or credit rating which can limit the type of property you will be able to afford.

Higher Lending Charges

Having a high LTV means there is a chance you will have to pay a higher lending charge (HLC).  The lender will take out insurance on your loan known as a mortgage indemnity guarantee using the HLC. This is a contingency to protect the lender in case the house is repossessed and sold at a loss.

What alternatives are there?

Help to Buy loans

For buying new builds there are the other option of Help to Buy equity loans. This involves putting down a deposit of a minimum of 5%, the government then loans you a further percentage of the property cost (ranging between 15% - 40% depending on the property location). Therefore you only need to take out a mortgage for the remaining value. You do not pay interest on the equity loan until after 5 years, after this point you will be paying interest until the loan is repaid.

Shared Ownership

This involves buying a 25% - 75% share in a property under shared ownership and then paying rent on the remaining proportion of the property. It is only necessary to take out a mortgage for the share of the property that you own meaning you might be able to borrow at a lower LTV and qualify for better rates.

Guarantor Mortgages

Some lenders offer guarantor mortgages which means a close family member provides their home or savings as security against the loan. In certain cases, it may be possible to borrow 100% of the property value based on the guarantor’s offering. With this option however it is important to consider the impact and potential strain on relationships.

Contact Us

Looking to find out more about the 95% mortgages available to you? Get in touch with one of our advisors by calling 01225 962456