How to increase your savings towards your second home
The cost of purchasing a second home can be reduced by building up your savings beforehand. The larger a down payment you can make on your property the better as this will help to reduce the overall cost of your mortgage and interest repayments. Here we take a look at some methods of increasing your savings in the run up to purchasing your second property.
The first step to boosting your savings is to cut your expenditure. Take a look at your monthly outgoings and see where you can make savings. Postponing foreign holidays and other major purchases will all help you to put extra savings away now.
A household’s major expenditure each month goes towards utility bills, such as your gas and electricity, internet connection, telephone and television. Try using a comparison site to see if you could be getting a better deal by switching suppliers. With your gas and energy bills, make sure that you give your supplier meter readings each month rather than relying on estimated bills, as you may be being charged for more gas and electricity than you are actually using.
If you have any outstanding debts, then try to clear them, especially the debts that are charging you the heaviest amount of interest. By clearing these now, you will be better placed to increase your savings towards your second home. You may be able to qualify for a credit card that offers an introductory nought percent interest rate. By paying off some of your debt in this way, you can help to reduce the amount that you are spending on interest too.
Depending on your current home set up, you could rent out a room at your property as a means of acquiring an extra income. You could put this money straight into a savings account, or use it to put towards your existing mortgage or debt repayments, allowing you to set aside a larger proportion of your income each month towards your second property.
The type of savings account that you choose can help to boost the rate of your savings. As a general rule, accounts that are restricted – requiring a 90-day notice period before you can access your funds for example, tend to offer the higher interest rates.
You should also look into cash ISAs. The majority of major banks, such as Santander, now offer these special savings accounts that currently allow you to save a maximum of £5100 each year completely tax-free.