How to afford a house in 2025
Purchasing a home is a significant milestone and, for many people, it’s the largest purchase they will ever make. If you’re a first-time home buyer, you may be feeling overwhelmed by the process and the price tag. But there are steps you can take to make your dream of homeownership a reality.
1. Be financially prepared
The initial step in affording your first home is saving for a deposit.
Your deposit is the upfront cost you pay for your house, with your mortgage covering the rest. The size of your deposit will determine whether you’re eligible for mortgage financing, your mortgage rate, and how much you can loan.
When it comes to knowing how much deposit is needed for your property, typically, lenders prefer a 10-20% deposit, but there are schemes and mortgages available for buyers with a smaller deposit.
Don’t forget, you’ll also have to budget for the extra costs of selling a house, which includes everything from estate agent fees, removal costs and any tax you may be liable to pay.
2. Find out how much you can borrow
After you’ve saved up for your house deposit, one of the most important things to consider is how much you can afford in terms of monthly payments for your new mortgage. You can gauge a rough estimate using a mortgage calculator, but you will need to speak to a mortgage advisor for a detailed understanding of what you can afford.
They will need to go over your income, credit history, debts, savings and deposit.
3. Narrow your location
The location of your home can also affect its value. In general, homes in urban areas and cities are more expensive than homes in towns and rural areas.
For example, the median home value of a terraced house in Newcastle is £175,786, while in Consett, the average terraced house price is £111,594.
If you’re looking for ways to save on your first home purchase, consider expanding your search to less expensive areas. This doesn’t always have to mean a new city but may mean considering options that are, for example, further from the city centre.
4. Work with a mortgage expert
Once you’ve saved for a deposit and narrowed your search to an affordable location, it’s time to start taking the next steps.
While you may not be ready to speak to a lender just yet, there are mortgage brokers that offer free mortgage advice and market insights to help you choose the right loan. This way you can approach a lender with greater confidence.
Some mortgage brokers charge a fee for their services, while others charge no fees and make their money by collecting a commission from mortgage lenders, so make sure to check first.
Tips on saving for a deposit
We understand that saving for your first deposit may seem like a daunting task, but with a little planning and discipline, it is achievable. Here are a few tips to help you on your way:
- Make a budget
Work out your income and expenses so that you have a clear idea of how much money you have available to save each month. Once you know this, you can start setting aside a specific amount each month to put towards your deposit.
- Save regularly
Try to make saving for your deposit a regular habit, rather than something that you only do occasionally. This will help you to make progress towards your goal more quickly.
- Invest in a Lifetime ISA (LISA)
The government’s Lifetime ISA allows you to save up to £4,000 a year until you’re 50, and the government will add a 25% bonus (up to a maximum of £1,000 a year) on top of your savings.
- Consider other options
If saving for a traditional deposit seems like too big of a challenge, there are other options available such as shared ownership schemes. These can help make buying your first home more affordable.
What if you’re buying alone?
If you’re thinking of purchasing a home as a single person, there are other options available to make your mortgage repayments more manageable.
- Shared ownership
With shared ownership, you will purchase a portion of your home and pay rent on the remaining portion. The advantage of shared ownership is that it allows you to gradually increase your ownership stake over time (depending on the housing association you are sharing ownership with).
- Shared equity
A shared equity loan allows you to take out a second loan (alongside your mortgage) to support you if you have a lower deposit, often opening up more mortgage deals. They’re also known as Partnership Mortgages and are primarily offered by house builders, local authorities, and as part of government initiatives.
For example, the Help to Buy Equity Loan was a government scheme that would loan first-time buyers up to 20% of their property price (or 40% in London). Although it is no longer in effect, you can stay up to date with the government’s other affordable home ownership schemes on their website.
Getting onto the property ladder with Mansons
Buying your first home is an exciting time. Just remember to start saving early, get pre-approved for a mortgage, and explore all of your financing options before making any decisions.
At Mansons, we know how important it is to own your own home. It’s more than just a roof over your head. We can help you find the best way forward and advise you appropriately when it comes to buying a house of your own. Contact us today to find out how we can help take that first step onto the property ladder.
