The first step to getting onto the property ladder is always the hardest.
For first time buyers saving the deposit for their first home can be a big ask, especially due to the fact many first time buyers are at the early stages in their careers with potentially lower income.
Furthermore, according to Rightmove data (October 2021) house prices and private rental costs have skyrocketed over the past year. As a result, it has arguably never been tougher to get onto the property ladder.
In some cases, first-time buyers can turn to the ‘bank of mum and dad’ for financial support to help them on their journey. However, it’s common for lenders to still ask for proof that the borrower can afford their repayments. Therefore, we have seen a rise in first time buyers taking the initiative and looking for alternative ways to save the money to buy their dream home. Suffolk Building Society (formerly known as Ipswich Building Society) has recently carried out research amongst first time buyers which found that 64% are looking for a second form of income to help save their deposit. A figure that rises to 85% when looking specifically at those living in London.
So, what do you need to know before you embark on a side hustle?
What is a side hustle?
Put simply, a side hustle includes any additional work that someone takes on in order to earn an extra source of income. This could be anything from complementary work in an industry in which they already work or alternatively in a sector completely unconnected to their primary job. Side hustles come in all different shapes and sizes depending on the needs of the individual.
Not content with working for someone else, approximately a third of those who have a side hustle had gone as far as starting their own business – again some in the industry they already worked in and some completely unrelated. Alternatively, some just sought income from other more domestic jobs such as gardening or cleaning, highlighting the fact that first time buyers are seeking employment in almost any industry in order to earn additional income to help fund their deposit.
For many first time buyers, the income earned from their ‘side hustle’ has resulted in a large portion of their deposit when purchasing a property. In fact, many individuals believe they would not have been able to get on the property ladder if it wasn’t for this second source of income.
Should you start a side hustle?
For many, the idea of a side hustle sounds like the perfect opportunity to earn additional money alongside their primary employment. But before you jump in at the deep end there are a few things you need to consider.
- Are you paying the correct amount of tax? There is a questionnaire from HMRC that will help you to understand what does and doesn’t need to be declared for tax reasons.
- Does the additional work fall within your contract of employment? Most employers won’t have an issue with staff looking for extra work, however, there could be a problem if it conflicts with their main job. Written permission may be required to ensure that both parties understand what is involved with the side hustle.
- While saving a larger deposit is desirable for many, it’s important to remember that those with a side hustle shouldn’t rely on their additional income for mortgage affordability purposes. The borrower must be able to demonstrate that all sources of income, whether that be primary or secondary, are consistent and ongoing, which can be tough when it comes to side hustles.
The current housing market and wider global climate have made it harder for first time buyers to save up for a deposit. This is especially true for those at the start of their career or those with a family to support. A side hustle gives individuals the opportunity to monetise a hobby or interest, by utilising any spare time they have throughout the week. Any additional savings go a long way when saving for a deposit and setting up a side hustle can give first time buyers a big step up when getting on the property ladder.
It’s great to hear that so many first time buyers are showing such initiative.