Tempted by the sound of a good mortgage deal, with manageable monthly payments?
Let’s face it - this is the ideal scenario for anyone buying a house.
But, everything has its price. If you want the best mortgage agreement for your situation, in most cases, you’ll need a large sum of cash upfront.
Unsure where to start? Here’s how to save for a house deposit.
How to save money for a house - top tips
Decided you can afford a mortgage? Time to start saving for your deposit!
With all the bad press about the property market, saving up for a house can seem like a near impossible task.
This is made even more daunting when you realise that for the average house deposit, the buyer needs to put down around 5-20% of the value of their home. This sometimes rises to 25% for the best mortgage deals.
But, there are ways to make this uphill struggle a little easier. Here are some top tips for saving for a house:
Get help from the government
The government can help you buy a house in a number of different ways. These include:
- The Help to Buy ISA
- The Help to Buy equity loan
- The Shared Ownership scheme
- The Right to Buy scheme
- The Starter Home scheme
Each of these have their pros and cons, so you need to weigh up what works best for you. Some of them are schemes specifically designed to help first-time buyers only, while some of them are available to everyone.
But, there isn’t one answer for the best way to save money for a house, as this depends entirely on individual circumstances. So, government help might not be the solution for you. However, you have other options.
Ask family members for help
This option is usually a last resort for most buyers.
However, leveraging any support available to you is always a good idea. Your parents (or other family members) can help you save for your house deposit. Try not to rule out the bank of mum and dad straight away!
This financial support can come in more ways than one. For example, they can help you with a loan, where you agree to pay this back under relaxed circumstances. Double check if they will charge interest.
Alternatively, you can take a more formal route. They can speak to your mortgage lender about providing some of the deposit. Be warned, though, this makes them liable if you fall behind on payments.
If neither of these options apply, cash gifts are always welcomed by those wondering how to save for a deposit!
Find cheaper accommodation
Downsizing often helps cut costs. These include:
- Heating bills
- Council tax payments
This is a great solution for those struggling to juggle paying rent and saving for a deposit at the same time.
Of course, this isn’t possible for everyone. But, it’s something worth thinking about for those finding it tough become a homeowner.
Budget, budget, budget
Saving for a mortgage? Do yourself a favour - get budgeting!
Consider your outgoing spend vs. monthly income. After that, work out what you can afford to cut back on, such as any unnecessary luxuries.
Remember - even the smallest cutbacks can make a big difference, particularly if you’re planning to save over a few years.
This is one of the most effective tips, as it should help improve your chances of getting a mortgage!
Remember hidden costs
Another part of the budgeting process is to consider all easily forgotten costs. This includes stamp duty, or rising interest rates.
Don’t make the mistake of assuming your deposit is the only extra cost you need to prepare for.
Sublet your property
If your contract and landlord allow it, consider getting a lodger.
Subletting a room in your home can be a good way to put some extra cash in your pocket each month.
Become a live-in guardian
Live-in guardians occupy certain listed buildings, such as stately homes. It’s their responsibility to look after the property.
Why would anyone do this? It can be hugely helpful for those saving to buy a house, as you’re charged much cheaper (or sometimes even free) rent.
Move back in with family
Particularly if you live in a city like London, you might be paying sky-high living costs…
One solution? If any family members are happy to take you in on a short-term basis, you might be wise to take them up on the offer!
Many have found that, for them, this was the best way to save for a mortgage.
Maximise every penny of your savings
Are your savings in a lifetime ISA? An instant access savings account? Or, a regular savings account?
All accounts are different. Some will allow you more flexibility, while others will allow you to pay less tax. So, do your research to work out what’s best for you. Everyone’s circumstances are different, so there’s no hard and fast rule that determines which you should pick.
Wherever you decide to store your savings, ensure they’re helping you on your way to buying a property.
Switch energy bills
You might be overspending on your energy bills without realising! Comparing and switching providers could help you save money for a deposit.
Saving for a mortgage - how much do you need?
Once you’ve weighed up your options, it’s time to get the ball rolling.
At this stage, you might not know exactly how much to save to buy a house.
But, if you can work it out roughly, this will make the process much more manageable. Decide on the house price range you’re looking at to start with.
It’s worth getting quotes from a mortgage lender. This will give you a good indication of how much you need to save up for a house.
Planning how to save for a house
Got a rough idea for how much you need? Now it’s time to get a plan together for how much you’ll be putting away each month. This should depend on how long you anticipate saving for.
Bear in mind - the rule of thumb is usually the sooner you want to be a homeowner, the more you’re required to save each month for your mortgage deposit.
Climbing the property ladder can be a lengthy process, especially as your deposit needs to be a lump sum. However, with a plan in place, you’re getting closer to buying your first home.
Start searching for properties
Getting an idea of what you would like to buy, and how much you can afford, will assist you in your mission to raise the deposit needed for a mortgage.
Consider many factors, including the number of rooms and any features you require. This is an important tip for those wondering how to save for a house deposit, as it helps to have a dream property in mind.
Remember, while the house itself is important, so is the area it’s in. You’ll want to consider every avenue, from crime rates to neighbourhood demographics. The best way to do this is to arm yourself with plenty of research, put together by a property report. Get your full report below.