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How to Save For a House: 12 Exclusive Tips

You’ve laid down your proverbial avocado on toast, and the time has come to consider saving for a house. Facepalm-inducing headlines aside, most of us know today’s answer to “how to save for a house” looks remarkably different now vs for our parents’ generation – but there are ways to get there.

In this article, we’ll share the best tips and practices to save for a house, from outlining your deposit, to new habits to try.

How to Save for a House Deposit

When you want to buy a house, what you’re thinking about saving for first is a deposit, which is a lump sum of money that you pay towards the cost of the property. You need this to get a mortgage, a.k.a your loan to buy the rest. Your first step is to work out how much you need to save for this.

1. Do some research to help get your bearings. The average deposit for first-time buyers in the UK is £33,000. An average salary of just over £54,000 is needed to afford a typical first-time buyer property in the UK’s major 20 cities.

However, deposit amounts vary: in London, the average first-time property deposit is an eye-watering £115,000, while in Wales it’s as low as £16,500.

2. Work out the percentage deposit you want to pay. The average deposit for a first home is 15% of the property value, meaning you’d get an 85% mortgage to pay for the rest of your home. However, you can pay a smaller amount. Deposits can be as low as 5%, meaning a 95% mortgage. To qualify, you need to prove you have a good credit record and pass your lender’s affordability test, which examines your income, outgoings and debt.

The higher percentage deposit you can pay, the smaller your monthly mortgage repayments will be – and you may get a lower interest rate, because it’s a smaller risk to the lender.

3. Weigh up your options. You could pool your resources with someone you trust for a bigger deposit and joint mortgage. However, it’s very important to be fully aware of the risks and legalities, as you’ll be sharing ownership of the house.

Alternatively, a shared ownership scheme lets you buy part of your home, with a housing association owning the rest, meaning you’ll pay rent to them. You’ll get on the property ladder, even if you can’t afford the deposit for a whole home. Many schemes also let you increase the percentage you own when you can afford more.

4. Take a month-by-month view. If you know how much you’ll need for a deposit, you can break that down by months. Saving for that average £33,000 becomes just shy of £1,000 a month for three years. Naturally, that’s not realistic for many. However, a more long-term saving goal is better than giving up completely. In addition, look at ways to save money more easily with the next few steps.

How to Create a Saving Plan

5. When you’re saving, it’s helpful to create a budget. Consider essentials like bills and groceries and commit to putting a realistic amount of your remaining funds straight into your savings. Pay this into your savings account first, so you don’t spend it accidentally.

6. Make day-to-day changes and cut costs on non-essentials where you can. Apps with spending analytics (like Revolut!) will help you work out where your money is going and where to form new habits. For example, meal prepping will save money on overpriced lunches at work.

For your shopping, try using a program that will give you discount notifications, such as Keepa, a price-tracker for Amazon, or a plugin that tells you about discount codes, like Honey.

7. Go intermittently sober. There’s a reason ‘Dry January’ is catching on: drinking less is good for your health and your pocket. The average Brit spends over £70 on a night out, and 40% of us go out once a week. That’s nearly £300 per month. Consider abstaining for a month and see how you feel.

8. Address your debts. If you’re trying to save while paying off debts, it can feel like the hard work you’ve put into saving is going towards repayments instead. If you’re paying high interest rates on an overdraft, credit card or loan, try to address these first. Not only will it boost morale, it’ll help when the time comes to approach mortgage lenders, as it demonstrates that you’ve successfully handled other loans.

9. Think about where you’re renting. Chances are, this is your biggest spend right now. The old rule-of-thumb that recommends spending only 30% of your income on rent feels very out-of-touch, especially in cities: In London, the average rent is 55% of your income.

Housing charity Shelter considers any more than 50% “extremely unaffordable” – yet it’s normal for many. There are options, though. Moving further out of the city and sharing with more people can bring costs down, and if you’re in London, look for areas further from the tube: this is a big rent price factor.

One day you’ll be swapping rent for your mortgage repayments. Keeping this in mind is motivational now and helpful for budgeting your loan later.

Other Ways to Save

10. Work out if you could be earning more. If you have a higher income, it’s easier to save - but that’s easier said than done. The job market is tough, but a first step to give you confidence is to shop around: look at job ads for your level and skills and see how much salary they advertise. You could be owed a raise, or you could earn more elsewhere.

Alternatively, reach out to people through LinkedIn, Facebook, or Twitter and ask them what people make in similar companies and roles to yours. You might think this is inappropriate, but in a recent survey, 27% of respondents said that if asked, they would tell a job candidate how much they make.

Don’t be afraid to apply for those jobs, either. At the very least, it’ll grow your contacts. If you don’t get a “yes”, find out why: you could learn something valuable for next time. If you get an offer, you could try to leverage better pay at your current role, or go where the money is.

11. Sell things you don’t need. Can you get by without your car? Even if you just drive 10,000 miles a year, you’re spending £1,000 on petrol. Then you have insurance on top. Selling it, on the other hand, would boost your savings.

Additionally, look at the stuff in your home: the typical UK household has £3,500 worth of unused goods. Ask older relatives if you can help them shift unwanted items on eBay, sell your old tech, offload your books via Amazon marketplace and sell your old clothes via apps like Depop.

12. Stash your savings cleverly. You could boost your savings with the right account. If you choose one with a high interest rate, your money will grow with interest from your lender.

However, interest rates vary depending on the bank provider, the deal in question and the stock market. Take time to work  out the best for you - and if you’re saving for a house, check if you’re eligible for a Lifetime ISA, as this could earn you as much as £32,000 in tax-free cash from the government.

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