Setting goals can help you reach your target sooner, but it’s vital to ensure your aims are realistic and that you have a clear plan of how you’re going to achieve them.
If you’re planning on buying a home or are already a property owner, here’s our rundown of the top financial goals you’ll need to focus on and some of the ways you might be able to reach them.
1. Saving for a deposit
Building up a deposit is often one of the biggest challenges first-time buyers face.
Your first step should be to work out exactly how much you need to save each month, and how long it’s likely to take for you to achieve your goal. Our savings calculator can crunch the numbers on your behalf so you can work out how much or for how long you’d need to save to reach a set amount.
Once you know how much you need to be putting away, look at ways you might be able to give your savings a boost. For example, there are various government schemes which may help, such as the Help to Buy ISA and Lifetime ISA, with the government topping up any contributions you make into these accounts by 25%. However, if you have both these accounts, you can only use the government bonus from one to help you buy a property.
You may also have financial help from the Bank of Mum and Dad, which may be prepared to gift you some money to help you reach your savings goal faster.
There are lots of free savings apps available to help you keep track of your savings progress. Some enable you to see exactly what’s coming in and going out of all your accounts and you can choose different goals to work towards, including buying a house, paying off debt and growing your savings.
2. Get the right mortgage for you
Whether buying a home, or remortgaging if you already own a property, finding the right mortgage is crucial.
Start by thinking about what type of deal you want. For example, if you’re worried about rates going up and want peace of mind that your payments won’t change, a fixed rate deal might be your best bet. If you’re comfortable with a bit less certainty, you might prefer to go for a variable discounted rate or base rate tracker mortgage. If you need help deciding, a mortgage broker can talk you through all the available options.
Brokers will be able to look at the overall cost of each mortgage, not just focusing on the interest rate, but also factoring in fees and incentives, so you can find the best deal to suit your needs.
3. Overpay your mortgage
For those already on the property ladder, your goal might be to be mortgage free as soon as possible.
If you can afford to, then overpaying your mortgage regularly even by small amounts can help you reduce the amount you owe, enabling you to shorten your mortgage term.
Before overpaying your mortgage, check with your lender to see if they will allow this without penalty. Most will permit some overpayments, typically of 10% of your mortgage balance each year if you’re in an introductory fixed, discounted or tracker period.
4. Remortgage regularly
Remortgaging once you reach the end of your mortgage introductory rate can potentially save you thousands of pounds compared to moving onto your lender’s standard variable rate (SVR).
Set a diary reminder at least three months ahead of the date your current deal is due to finish so you can start looking into alternative deals to remortgage to. Many remortgage offers are valid for between three and six months from the date they’re issued and arranging your next mortgage in advance means you can move straight from one deal to another without moving onto your lender’s SVR.
5. Retire early
If your financial goal is to retire early, you’ll want to get your mortgage paid off as soon as possible.
L&C research found that around three million people think they’ll still be paying off their mortgage beyond the age of 65, but if you want to be mortgage-free sooner than this, you’ll need to think carefully about ways you can reduce the amount you owe.
One way to do this might be to consider an offset mortgage, whereby you offset any savings you have against your mortgage. Rather than earning interest on your savings, the balance is used to reduce the amount of interest you pay on your mortgage debt, enabling you to pay off what you owe more quickly.
It’s not always easy to decide if an offset is right for you – it’ll depend on several factors such as how much interest you’re earning on your savings and the interest rate of the offset mortgage, as well as how much you decide to offset, so seek professional advice from a broker if you’re not sure.
Having financial goals and working hard to achieve them can reap major long-term rewards. If you’re planning on buying a property, or you already have and hope to be mortgage free one day, you’ll need to put practical steps in place to achieve these goals. So don’t delay - the sooner you start planning, the sooner you’ll be able to make them happen.