Saving for your House Deposit: Tips and Tricks for Success
Home ownership is an aspiration many of us want in life but getting there isn’t always straightforward. The cost of living and renting is getting higher and higher so how can you begin to save for the deposit needed for your first home? Here are some ways to get there and also some schemes you can tap into to help boost your savings.
SET YOUR GOAL
Setting a deposit goal is the first step in knowing what you need to save and how long it’s going to take to get there. It will also help you understand the price range of house you can look at when trawling online estate agents’ websites. Try an online mortgage deposit calculator to see how much monthly savings and deposit sizes are likely to effect your deposit goal timeline.
A 10% deposit on any property is a good place to start as this will give you options in mortgage providers, so if you’re looking at houses with a price tag of £200,000, you’re likely to need a deposit of £20,000 saved. This can vary but if you get that 10% saved you know you’re ready to start seriously looking.
BUDGET FOR MONTHLY SAVINGS
Once you have a goal in mind, get drastic with your budget and work out how much you can afford to set aside each month for your deposit. This should be amount which ensures you can live comfortably but still head towards your deposit saving goal. Setup a standing order into your savings account so you are not tempted to use the money in another way and your deposit savings continue to be boosted. There are a variety of budgeting apps and tools within many online banking apps which can also help you to analyse your spending and set up savings goals.
ASSESS YOUR RENTAL SITUATION
If you’re desperate to make that deposit money as quickly as possible then you could consider downsizing your current living arrangements. Many people move back in with their parents and benefit from a year or so of rent-free living to boost their deposit fund, others downsize and cut back on their rent by £100-200 a month, allowing for this cash to be driven straight into the deposit fund. Additional savings per year is sometimes worth the short-term compromises in living arrangements.
CUT BACK ON EXPENSES
Finding ways to live more cheaply and cut back on little luxuries can really help boost the amount you have spare to put into your deposit savings. Simple changes like reviewing your energy bills and switching to cheaper supplier can save you £100s each year. Other outgoings like gym memberships, eating out and subscription services should be assessed to see if you can cut back or streamline them to bring in extra monthly savings. It may sound like missing out on the best bits of your week, but the short-term loss will be a huge lifetime achievement when you’re able to bid for your first home.
EXPLORE ISA SAVING SCHEMES
To make the most of your savings, you want them to be held in a reliable savings account which ensures they grow year on year, in terms of interest as well as the deposits you make. An ISA is a great option because they remain tax free. What’s more the Help to Buy and Lifetime ISA options are backed by government help, where you can earn a government bonus of up to 25% on your savings when you buy your first home. Unfortunately the Help to Buy ISA scheme is now closed for new applicants but current savers can continue to use the scheme until December 2030.
CONSIDER GOVERNMENT SUPPORT
The government wants to help people get onto the property ladder, as well as support those looking to move who may not currently be able to afford it. The Help to Buy: Equity Loan can help if you’ve managed to save up a 5% deposit. The scheme allows you to put down this 5% on a new build property and they will loan you an additional 20% (40% in London), allowing you to take out a mortgage on the remaining property value.
Alternatively, if a full mortgage is not within your budget, you could consider Shared Ownership, which now allows you to purchase and get a mortgage on 10-75% of a property’s value and pay rent on the remainder. Getting mortgages on a Shared Ownership property can be difficult, but it isn’t impossible and can be a manageable alternative for some households.
Getting all of the funds together for a deposit for your first home is a great achievement and something many of us consider a pinnacle in our adult lives. Getting there involves commitment, dedication and the ability to abstain from some of life’s little luxuries but the result is almost always worth it.