If you’re looking to move home, the financial element can be hard. Here we have some top tips for saving up for a deposit that should make it that bit easier…
Trying to save up enough money for a house deposit is tricky. Saving money can be daunting, especially with so many other financial responsibilities; how are you meant to decide where to make the cuts? In addition, the cost of living is on the rise, and most houses need at least a five per cent deposit which is no mean feat. The question is then, how are you meant to save enough to get this five per cent? Luckily, by implementing a few habits and making lifestyle changes, you will soon see your savings grow, so let’s get into it.
Set a Target
This is obviously the first step. You need to know how much you are trying to save. This then gives you a better idea of just how hard you need to work. In addition to a figure, it may be beneficial for you to come up with a time frame too. When do you want to have this house deposit by? To come up with these targets, it would be worth looking into the housing market in your local area or the area within which you want to live. As mentioned above, most mortgages require a five or ten per cent deposit; by looking at the market, you will have a better idea of how much you need to save in order to get on the property ladder.
Assess Your Current Financial Situation
While saving for a deposit, it is also worth taking a closer look at your finances as a whole. In addition to having the deposit, there are a number of other financial considerations that you need to make. For example, do you have a good credit score? Have you ever filed for bankruptcy? Have you ever had a county court judgement against you? These are all things that could impede your ability to secure a mortgage unless you use a mortgage provider like MoneyNest who can help you if your financial background isn’t the best. Your bank statements are also likely to be looked at, so be sure to remind your friends and family that sending you money with funny references can actually harm your chances of getting a mortgage.
Revise Your Daily Spending
Think about the amount of money that you spend every day. Often you will find that you don’t even think about it. For example, do you buy yourself a coffee or your lunch every day instead of bringing it from home? Do you pay for the bus or parking when it is entirely feasible that you could walk? For a day, try to be more mindful of just how and when you spend your money, and it is likely that you will be able to identify areas that you can cut back.
Make a Budget
After you have gotten your daily, frivolous spending under control, you can begin to think about your monthly budget. Write down all of your comings and outgoings for the month; it really helps when you can see it all in front of you. Again, you need to look for areas where you can cut back. Perhaps you are still paying for a subscription service that you don’t use, or maybe you have realized that you eat out or go out more than you can afford to. Strip back the luxuries and come up with a budget. Be realistic and remember that it is okay to budget for a luxury or two every month, but you can’t make a habit of it because the odds are that once you are in your house, you will need to continue to keep a watchful eye over your pennies.
Always Pay Yourself First
When you receive your pay before you do anything else, you should transfer a set amount into your savings account immediately. After working out your monthly budget, you should have a better idea about what you can afford to transfer into your savings. Set up a standing order to remove that money from your account before you have the chance to spend it. This then forces you to live on a smaller amount for the rest of the month because you cannot spend what isn’t there. You may also wish to bolster your savings with any money that you have left the day before you next get paid.
Control Your Bills
Depending on your current living situation, you might be able to adjust your utilities to save money. If you are renting, you may need to discuss this with your landlord. Switching energy providers or installing smart meters can help you to save money that you can then put towards your house deposit savings. Switching utility providers won’t be possible for everyone, but there are other ways that you can save your money. Be more mindful of the money that you are spending on your utilities, only have your heating on for an hour or two a day and be sure to turn off the plug sockets that aren’t in use.
Look for Ways to Earn on the Side
If you are struggling to save enough money every month to put towards your deposit, then you should look for ways to boost your income. For example, you could take on a second cash-in-hand job like bar work or babysitting. Or you could sell off some of your old stuff through online marketplaces like Facebook or eBay. This can generate an extra income that you don’t need, and so the money can go straight into your home deposit fund. That being said, if you do take on a second job, depending on what it is and how you are paid, it could change your tax obligations, and you may end up losing most of the extra wage to tax, so that is something you should think about too.
Use the Right Savings Account
You need to ensure that you are saving your deposit in the right type of account. There are several options; if you are not a first-time buyer, then you need to find an account with a decent interest rate to make the most out of your money. However, if you are a first-time buyer, then you might want to consider taking advantage of one of the government schemes designed to make it easier for you. You could use a lifetime ISA; in this ISA, you can put up to £4000 into the account every tax year. The government then contributes an additional 25% on top to boost your savings. There are stipulations. Firstly, the cash has to remain in the account until you exchange on your first property. Your contribution to the ISA also counts towards your annual limit, and you can only make contributions into your lifetime ISA until you are 50.
In Conclusion
Owning your own home is the ultimate goal for a lot of people. However, getting on the property ladder is notoriously difficult. Whether you are a first-time buyer or looking to procure another property, one of the biggest obstacles is the deposit. Saving money is not always easy when you have all of your other financial responsibilities to contend with. Using the above tips can help you to grow your savings and your house deposit more quickly, allowing you to get on the property ladder sooner.
