How To Save For A House When Renting
When you are renting a home, the idea of being able to own your own one day can seem nothing more than wishful thinking. Obviously it depends on a combination of how much your rent is, and how much you earn, together with how much you already have put aside in terms of savings, but for many, the majority of their salary goes on rent, meaning they can save very little for their purchase pot. And with house prices going up and up, even increasing your deposit can seem futile.
What can you do to try and get on the property ladder more quickly - or more exactly, how can you save as much money as humanly possible whilst renting?
The first thing to consider is your work: can you realistically ask for a pay rise? Benchmark your salary against the industry using a salary comparison site, or simply looking at job adverts for a similar job elsewhere. If you are being underpaid, then you can raise it with your boss or through the appropriate internal channels (such as HR) and see if you can get an increase.
Alternatively, you could apply for a higher ranking job and get yourself a nice promotion, or look for a similar role elsewhere: usually the best and easiest way to increase your salary is to move to another company, rather than internally - particularly with large companies where there are pay bands, meaning it can be harder to increase your salary significantly without a promotion, whereas a sideways move to another company can come with a healthy pay increase.
If there is no prospect of the above, no matter all your efforts, then think about other ways to increase your income: if you have a hobby, could you potentially make money from it? For instance if you create jewellery or craftwork, could you set up a part-time small business to get some additional income? Or perhaps you simply have lots of things you don't need anymore - can you sell them on ebay to get another £500 to put into your pot?
If you are building up a savings nest egg, then it is essential that you get the best interest rate possible. It is tough when interest rates are so low to get anything decent at all, but use the rate comparisons online or in newspapers to keep an eye on who is paying the highest interest rate (beware of the terms and conditions) and then go with the highest interest rate you can find, and check every few months to see if there is a better rate out there elsewhere.
Next, you will need to try to keep your costs down. If there is the possibility of moving back in with your parents instead of renting, that is something to consider. Also if you are currently renting somewhere very nice, you could consider moving to somewhere cheaper to rent, just for a short while to help you boost your savings pot.
Try to cut out unnecessary expenses, without going to the level of depriving yourself of what you need of course - just simple things like making your own flask of coffee before going out instead of paying a few pounds on the way to work can save around £15 a week, which builds up to a significant amount of money over the course of a year (£15 x 52 weeks = £780 - a pretty healthy amount of money!)
By keeping an eye on what you spend, living frugally but realistically, and seeing if you can either increase your salary or make some money on the side, you will give yourself a good chance of being able to save enough for a deposit on a realistic first property.Last update: 28 Mar 2015
More first-time house buying articles:
- Why London Property Prices are so High
- What is a fixed rate mortgage?
- Impact of Rising Interest Rates on Mortgage Cost
- What is a mortgage in principle?
- Living in Central London Pros and Cons