Saving up enough money for the deposit on a house can feel like a daunting prospect but it is possible and is something you can do quite quickly with the right savings techniques. Here, we discuss some simple ways to manage your money and put it towards saving for a house.
Managing your monthly budget and being able to section out your spending using the 50, 30, 20 rule, will help putting money aside for your house deposit easier. With house and bill prices increasing, reducing your everyday spending can minimise your outgoings. Whether you are currently living at home or renting, making small changes to your spending can save you a lot of money.
To work out how much you’ll need to save for an initial deposit as well as the following mortgage payments, use a Mortgage Affordability Calculator to work out the correct monthly payment by entering your annual income and other information. Many mortgage providers ask for a 10% deposit, so for example, if you are considering buying a house which is on the market for £200,000, you are required to put in a £20,000 deposit (plus the cost of legal fees, stamp duty and removal fees). Putting away £200 a month means it will take just over 8 years to save up the deposit you need. If there are two of you: £400 a month could see you with £24,000 in five years – more than enough for a deposit, plus the fees associated with buying a property.
It’s important to understand that buying a house isn’t always a quick process. If you are currently renting, whether this be alone or with a friend or partner, moving back to your family home or moving to a shared accommodation temporarily may help cut the cost of your outgoings. Still keep in mind that there will be a small amount to pay on bills, as you will need to put towards whatever electricity and gas you use in the house. However, in the long run, this will benefit your savings total.
Of course, bear in mind that moving home, even between rental properties, does come with some costs of its own. However, the upside outweighs the downside. After a few months of paying lower rent, you’ll have been able to save more to put towards buying a house. Factor in that you’ll need to pay another deposit before you receive your current one back, as well as a month’s rent upfront. So, you may need to find this money first before you can do anything.
If you’re not able to move in with anyone to save money, look at downsizing your property and moving into a smaller house or flat instead. This should mean you’ll pay less rent and potentially less on your bills – as it won’t cost as much to run and heat. The beauty of renting means you can move once your contract is up, so wait for the next renewal date and look for a smaller property.
There are a range of schemes out there that can help boost your savings or accelerate the house-buying process if you meet certain eligibility criteria.
Set up your Help to Buy ISA or look into savings accounts offering higher than average interest rates to transfer money into regularly – plan to move your savings at the start of the month as part of your regular budget.
The Help to Buy Loan can help you get on the property ladder, with the Government covering up to 20% of your house price as a deposit. You will need to pay this back, but the first five years are interest-free. This option is mainly used when purchasing new build properties and, in most cases, you will need to provide a 5% deposit and have been approved for a 75% mortgage to be eligible. For many, it’s offered them the opportunity to buy a home that best suits their needs, and that they can live in for years to come.
A Shared Ownership Scheme allows you to buy a percentage of the property and rent the rest. It’s a great way to get on the property ladder, as it allows you to buy more of the property as time goes on and you can find more savings. This process is called ‘staircasing’. To qualify, you must have an income of less than £80,000 as a household and have no credit issues.
If you have worked in a certain industry such as the NHS, the police or the Ministry of Defence for more than five years, and have more than five years left before you’re due to retire, then you may qualify for a Keyworker mortgage or a rent-to-buy scheme. These are managed by your local authority or housing association and have their own set of criteria you must adhere to. Your household income must not exceed £60,000 and applicants must be in a permanent employment position. Find out more here.
The Starter Home Scheme is available for those who are first-time buyers who are looking to buy a newly built home or a home which was previously owned by someone who bought it as part of the scheme. With being a first-time buyer, you may be able to buy a home for 30% to 50% less than its original market value.
Whether you are considering buying a house in the next couple of years or are looking to start your savings journey for your future, following these simple steps to help with your house-buying savings pot can make the process easier. With multiple loans available to kick-start your house-buying journey, Sunny can help advise you in the right direction. For more information on budgeting your money, browse our range of articles.
No, loans cannot be used to fund a house deposit. You will be asked to confirm where you obtained the money for your deposit and it must be from a non-repayable source such as savings or given as a gift.
This can make obtaining a mortgage more difficult and so you may need to do some work beforehand to improve your credit score or be prepared to pay a larger deposit.