Saving for a mortgage can be a daunting task, but it’s so much easier when you have some tactics in place to help you save. When you think of the full amount you need to save, it can be overwhelming and feel impossible. This is because deposits are roughly around 10-20% of the house you want to purchase, so is generally over £10,000.
Having a plan of monthly saving can make it feel a lot more achievable, and help you have a time frame of when you should be able to have your deposit saved up by. This is one of the biggest expenditures you will ever make, so keep on reading for some expert advice on how to save for a deposit.
Having your deposit stored in a separate account can make saving a lot easier. When you put money in a separate saving account you can easily see what you have left to spend each month without the risk of using your savings. When you have all of your money together in one account, it can be difficult to keep track of how much you have saved, along with any disposable spending money.
Sometimes when we see more money in our account we are a lot more likely to develop an urge to spend it. Keeping your savings in an individual savings account means you are a lot less likely to accidentally spend it and also you can easily see how much you have saved and how much more you need before you reach your goal.
A lot of modern online banking apps allow you to store your savings in ‘pots’. For instance, if you need to save for separate things (such as legal fees or stamp duty) you can allocate money towards each cost. This is very helpful for saving money for more than one thing at a time.
Knowing exactly how much you have to save can help the whole process feel much more achievable. Take your monthly income and look at what you will need to spend, including bills, food shopping, petrol, and any other essential payments you make every month. Whatever you have remaining can then be used to save monthly.
Of course, make sure you keep yourself some money as saving for a house shouldn’t mean you can’t carry on living your life. Move what you want to save into a savings account and then at the end of the month (if any of your spending money is still in your account) you can move this to your savings.
It is important to leave a reasonable amount for yourself to spend, as this avoids the need to dip into your savings account at any point. Instead, allocate yourself more than you think you will need, then at the end of the month if you have money left over, you can move this across to your savings before your next payday.
When saving for your deposit you don’t want to make too many unnecessary purchases, as this is money that could go into your savings account. As mentioned above, this is why budgeting is important. This way you can allocate yourself some spending money, while limiting yourself to avoid temptation to spend too much.
If you find yourself spending unnecessarily, try and think about how much longer it will take you to get your deposit if you are to keep up with this spending. Envision all the extra money you’ll have to waste on rent because you cannot afford your deposit yet. If you leave yourself a nice chunk of spending money each month, you can avoid dipping into your savings and ensure that you are in total control of your monthly expenditure.
If you have the opportunity to move in somewhere cheaper (whether that be renting a smaller property or moving in with your parents) then this is definitely worth doing. Of course, this isn’t always an option and could be more fuss than it’s worth, but it can help you save money to buy your home a lot faster.
Once you have your deposit and can move into your own property, you will find that your monthly mortgage payments will be about the same, and sometimes even cheaper than what you pay monthly for rent. Saving that initial deposit is the hard part, and wasting money on extortionate rent prices seems pointless if you could live somewhere cheaper comfortably.
There are many money savings schemes in place to help first-time buyers save for their deposit. A Lifetime ISA is a great option for people who are saving for their first home. You can use a Lifetime ISA to buy your first home or save for your retirement, though in this case, we will be looking at how it can help first-time buyers.
You must be 18 or over but under 40 to open a Lifetime ISA. With this ISA you can put in up to £4,000 each year (until you’re 50) and the government will add a 25% bonus to your savings. So, if you are to put £4,000 in during the financial year, the government will add £1,000 to your savings for that year. This is a great way to help you save up for your deposit as you are getting that added boost from the government.
Before you begin saving, it’s good to know exactly how much you need to save. One good way to calculate this is to look at the type of house you want, and see how much money those houses cost in your desired area. Then, simply calculate between 10% and 20% of that cost and you’ll have the maximum amount that you should need for a deposit.
This helps you to set a realistic saving goal, and should give you a good idea of when you will be able to afford it. With a solid goal like this in place, you’ll know exactly how much you need to save a month in order to reach that goal.
Saving money for a deposit doesn’t need to be as stressful as you might think. The best thing to do is budget realistically and come up with an achievable amount and timeframe for your personal situation. Once you figure all of this out, you will find it much easier to actually save for your deposit, rather than just feeling stressed and overwhelmed about an amount of money than initially feels unachievable. Follow these tips and you’ll have your deposit saved up in no time!More first-time house buying articles: