Saving up the deposit for a property has always been tough, especially when looking to purchase a first home. This couldn’t be more true at the moment, according to Rightmove data (Oct 21) house prices and private rental costs have been skyrocketing over the past year. Add to that the fact that many first time buyers could be facing economic strains following the pandemic and it paints a bleak picture for those trying to get on the property ladder.
For some first time buyers, the ‘bank of mum and dad’ will be able to support them with their deposit, however, many lenders will still want proof that a borrower is able to afford repayments too, and can responsibly manage their own finances. As a result, a number of first time buyers are looking for alternative ways to help raise cash. According to recent research from Suffolk Building Society (formerly known as Ipswich Building Society), 64% of first time buyers are turning to a second source of income to help them save for their deposits. This figure rises even higher when looking at London specifically, with the number reaching 85%.
In the simplest form, a side hustle is when someone takes on an additional job as a way to earn an extra source of income. These jobs come in all shapes and sizes and in some cases will complement the industry or type of work that the individual does for their ‘main’ job.
Of those surveyed, roughly a third have started their own business as their side hustle. In some cases, this may have been related to their current job, but in others, it was in a new industry altogether. Some of the other common side hustles include informal work at weekends in the hospitality industry or domestic work such as gardening and cleaning. Finally, freelance work was also very popular, with a number of respondents using the experience they’ve gained in their current employment to freelance for friends and family.
Ultimately, side hustles come in all varieties, and the best choice is completely dependent on the individual.
The income earned from these ‘side hustles’ is proving to be extremely beneficial for first time buyers, and in many cases, it actually makes up a large portion of their deposit. As a result, many first time buyers believe they would have not been able to get on the property ladder as soon as they would have liked if they didn’t have a second source of income.
- It’s important to check they are paying the appropriate amount of tax. The HMRC has a questionnaire that is useful for understanding what does and doesn’t need to be declared for tax reasons.
- Ensure that all additional work falls within the contract of employment with their main employer. The majority of employers won’t have an issue with staff taking extra work, as long as it doesn’t conflict with their primary job. In some circumstances written permission is required to ensure all parties involved understand the agreement.
- Of course, saving a larger deposit can be desirable, however, first time buyers should not rely on their additional income being considered in the mortgage affordability assessment. Applications require borrowers to be able to demonstrate that any source of income is consistent and ongoing.
It’s getting increasingly difficult for first time buyers to save up for a deposit, especially if they are early in their career or have other expenses to consider such as a family to support. Side hustles provide the perfect opportunity to turn a hobby into a viable income by making the most of any spare time throughout the week. When saving for a deposit any extra savings can go a long way, allowing first time buyers to get on the property ladder as soon as possible.
Joanne Leek is Marketing Manager, Mortgages, of Suffolk Building Society. Suffolk Building Society, which changed its name from Ipswich Building Society in 2021, is a national mortgage lender and operates a manual underwriting approach, so applications are reviewed by an individual, not a computer.
Please note this is a paid piece