A house is likely to be the most expensive thing that you ever purchase- so saving a deposit can feel pretty daunting. And at first, it is! Especially if you are new to saving, and you are unsure about how to make your money work best for you. Often, the best step that you can take when you are figuring out how to save for a house is to just get started. Starting your savings pot, and then adding to it consistently over time is the best way forward- it will soon build up- and that goal of your first home won’t seem so far out of reach!
When you live in a city such as London, the reality is that properties in the area are expensive- and it can seem like an impossible task to save up that all important house deposit. I’ve teamed up with Jazmine from Jazzabelle’s Diary to bring you our top tips for how to save for a house. Jazmine is a fellow Londoner, who is also saving up for her first home. Check out her blog to find her top tips too! Jazz also has the most incredible Instagram account, where she shares snippets from her life in London.
How To Save For A House
If you are struggling to save for a house, these are my top tips and tricks for how to save for a deposit- you might not even notice yourself saving money! These tips will slip seamlessly into your daily life, and could mean that you get to your savings goal a whole lot quicker.
So without further ado…
Reframe the idea of budgeting
Think of a budget plan as tool that allows you to spend more money on the things that are important to you, and less on the things that aren’t. Flipping the idea of budgeting into something more positive means that you can control your spending in a way that serves you. For example, maybe saving a house deposit is important to you, getting your nails done is important to you- but you’re not much of a foodie. Reduce your spending on groceries and eating out, and send that money to the things that matter to you instead!
Become familiar with your emotional spending triggers
We all will succumb to emotional spending from time to time- it’s inevitable! But by knowing what your emotional spending triggers are, you can better anticipate it and manage it. For example, you might already know that perhaps feeling lonely (or even bored!) when you’re home alone on a Friday night will mean you’re scrolling through ASOS in no time. Instead, plan to put your phone in another room, jump in a bubble bath, watch a film, and enjoy a peaceful moment instead.
Plan in advance
Planning just about any expense in advance is likely to save you some money. Whether that’s getting a bargain advance train ticket, carefully planning gifts using discount promotions, or remembering to pack your lunch instead of grabbing a meal deal. You don’t have to be buying Christmas gifts in January, but anticipate those key dates in your calendar and get organised so that you can pop those savings into your house deposit fund instead.
Unsubscribe to marketing emails
You know the emails- the ones that entice you with VIP preview sales and discount codes. Unsubscribing from emails from your favourite retailers means that you are more likely to shop online when you actually need something, rather than when you’re being marketed to with sales and discounts.
Set up ‘sinking funds’
Sinking funds are little ‘pots’ of money that you gradually add to over time, in order to cover an expense. For example, you might have sinking funds for Christmas, your best friend’s hen do, and a holiday. Challenger banks like Monzo and Starling allow you to set up literal ‘pots’ or ‘spaces’ within their apps- it’s a super motivating way to save as you can see a visual of your progress. PLUS it means you won’t be taking money out of your house deposit savings- because that always feels rubbish!
You might also enjoy: What Is The Average Cost Of Living In London?
How Long Does It Take To Save For A House?
Saving for a house deposit is like the age old question of how long is a piece of string? The larger your house deposit, often, the longer it will take to save. The time it takes you to save your deposit will also depend on your own circumstances. Things such as your current outgoings, your income, and how much of your income you are able to put aside each month will all have an impact on how long it takes you to save for a house.
You’ll also want to consider the percentage you’d like to save for your house deposit, and the fees involved in purchasing a home. Are you hoping to put down a 10% deposit? 20%? 15%? Having a goal percentage in mind can help you to determine how long it might take you to save for a house.
Once you have that goal amount in mind, consider how much you are able to save each month. For example, perhaps you are in a position to save £600 a month, and your house deposit goal is £25,000- it would take you the equivalent of 41.6 months to save for the deposit (around 3.5 years).
How Much Should You Have Saved Up For A House?
Ideally, you want to put down as much money for your house deposit as your circumstances allow, so that you are borrowing less money from the lender. When you borrow less, your monthly repayments are less, and you’ll pay less interest in the long run. Having lower monthly repayments is a real bonus as it allows more flexibility in your life. More often than not, mortgages are for 25 years or more, and who knows what life might throw at you during that time? Having lower monthly repayments is always going to be a positive when it comes to home ownership.
Many lenders will accept a 10% deposit (but remember you’ll also have to have extra saved for fees- legal fees alone can come in at £1,000+ for some buyers). However things are changing all the time, and in the current climate it could be beneficial to have around a 15% deposit to be considered for a mortgage by more lenders.
How To Increase Your House Deposit
One of the best ways to increase your house deposit is to open a Lifetime ISA. A Lifetime ISA is a form of savings account where for every £4 you put in, the government tops up your savings by £1. You can put in up to £4,000 a year, and the government will top this up by £1,000. If you don’t currently have a Lifetime ISA, you’re leaving free money on the table!
There are a few restrictions on using the Lifetime ISA to buy your first home- you must be under the age of 40 when you open the account, you must be a first time buyer, and there are limits on the value of the house that you are able to buy with the Lifetime ISA. The maximum value of the property must be no more than £450,000 (both in and out of London).
Despite these restrictions- it’s a great way to get free money towards your first home.
If you are buying with a partner- you can both open a Lifetime ISA, and then combine them when you are ready to buy your first property. That means double the money towards your home!
For example, if you both saved £12,000 over the course of 3 years (£4,000 a year). You would receive £3,000 from the government each. That would amount to an additional £6,000 towards your first home which is an exceptional bonus.
Final Thoughts On How To Save For A House
- Find a budgeting method that works for you– take a look at the Zero Based Budgeting method, and the 50/30/20 method to see whether one of these methods could be right for you.
- Reduce your living costs– if you are living and working in London, you might want to check out How To Live On A Budget In London which has some top tips for saving more money day to day.
- Level up your money management skills– personal finance is always a work in progress, but by seeking out more information on how to better manage your money, you are more likely to achieve your financial goals. Check out How To Be Good With Money to find out more.