From the famous saying, an Englishman’s home is his castle; it is only natural that a person’s security is knowing s/he owns a house. However, with house prices rising, cost of living increasing and wages stagnant, owning a home and being a first time home buyer may seem a hopeless dream. But don’t be discouraged. Owning your own home is possible and is an investment for your financial future. In this Quick Loans Express article, we explore how to save for a house like a boss.
How to Save for a House
I believe it is all about your mindset when it comes to saving for a disposit. It is crucial that you keep your long term money goals at the forefront when earning, spending and saving money. When I was saving more my downpayment, I always kept a clear vision of the house I was going to buy in my head as an encouagement.
Save for a House As Early as Possible
From when I got my first job, I always knew I wanted to buy a house. My paycheque was small, but I started saving straight away, even if it was just £50 a month. When I started earning a little bit more, I used to budget for my savings. I had a direct debit of £200 that would go straight into my savings account a few days after my monthly paycheque. Also, whatever I had left at the end of the month, even £5 or £10 would go straight to my house fund savings.
Starting to save early in your life will get you on the property ladder much faster as you can benefit from accumulated compound interest. Starting to save early on in life helps you develop positive spending and saving habits. If saving is your priority, even small change will find its way into your savings account.
Saving for a House? Do without!
Another obvious way to save money is to cut costs. I avoided getting coffees, buying store-bought lunches and going on nights out. This doesn’t mean I didn’t have fun. I set aside a budget for holidays and nights out and stuck to it. When I was out shopping, and I liked something that wasn’t essential nor cheap – and I would usually splurge – I would say, this one is for the house, and I would put that money away in my savings instead.
Budgeting is King When it Comes to Savings
Financial experts are not wrong when they say the key to keeping on top of your money is budgeting. Budgeting is essential for a healthy and positive relationship with money and allows you to live your life on what you can afford. Besides for the ordinary expenses, budget for extras as well, so it doesn’t become a huge monotonous chore and one that you will need a online payday loan to keep up with.
Help to Buy: Government Schemes
There are a few government schemes that can help you save towards a downpayment and one that I personally invested in.
- Help to Buy ISA or Lifetime ISA – you can receive 25% or up to £3,000 towards your downpayment when you save money in one of these ISAs.
- Rent to Buy Scheme – The government have selected rent to buy properties that allow you to rent a property for 20% less so that you can save for a disposit. You can go on to buy the property you already live in when you can afford it.
- Benefit from Stamp Duty Land Tax Exemption for properties up to £300,000 or price reductions on properties up to £500,000.
There are other ways that you could save money to buy a house. For example:
Move-in with your parents or a close friend
If it is possible, moving in with your parents, close family member or friend is an ideal way to cost your rent costs and save for a mortgage instead. However, you need to treat this opportunity correctly, so it will not spoil your relationship. You will need to agree beforehand how much you will contribute towards rent, electricity and other household costs. As you will be living in a shared living space, you will also need to decide how you will split the chores and the rules of the house. You will also need to find a way to live independently within your parent’s house. (Not an easy task!)
Save Money for a Mortgage by Getting a Lodger
If you have a spare room, you might want to consider taking in a lodger to lower the cost of your current rent or use that money towards saving for a downpayment. You can read more about the legal and personal considerations about taking in a lodger here.
Renting for Less Will Give You a Higher Mortgage Deposit
Although it may not be so convenient, it may be worth your while renting something smaller, moving into shared accommodation or moving further away, so your rent is cheaper. In my experience, together with my partner, we rented a studio flat, and although it wasn’t easy, we remained laser-focused on my main goal and saved a lot of money that way towards a downpayment and avoided short term loans for bad credit.
Nothing comes easy in life, and for first-time buyers in this day and age even more so. Before buying a house, check out our article about ‘First Time Home Buyer: Tricks and Tips‘. Being prepared, will make the mortgage process a lot easier to deal with. Once you get the keys to your new house, you will know it has all been worth it! Good Luck!