This guide outlines smart ways to save money for a house — and boost your finances even before you get into the buying a house process!
Whether it’s your first home or you’re already on the property ladder, saving up for a deposit can often feel like the hardest part of the process to save money for a house. You’ll probably have to cut back in some areas of your life and, when the end goal feels so far away, that’s easier said than done.
It’s important to stick with it, though. After all, a large deposit means you’ll be in a better position when it comes to finding a good mortgage deal with relatively low interest rates — and easier to be able to use mortgage points. In this guide, we reveal everything you need to know about how to save money for a house and offer some handy tips and tricks to help you to boost your finances, too.
How much do I need to save?
First things first, it pays to find out how much you actually need to save. Usually, a first-time buyer will be required to put down a 20% deposit but, for those already on the property ladder, it can be as little as 5%. If you are a first-time buyer and know that you’ll struggle to save 20% of the final house price, don’t panic.
There are plenty of mortgages available that only need around a 10-15% deposit. Not to mention, a few government initiatives and schemes to help.
Using the services of a free mortgage broker like Trussle can not only help you to understand how much of a deposit you’ll need but also what sort of house price you can realistically afford in the first place. Comparison services such as Trussle are time-efficient, often responding to queries within a matter of days, having contacted dozens of lenders on your behalf.
Their involvement will then help you to narrow down your search to areas that you can actually afford and the mortgage advisor will also confirm whether you have a good chance at getting a mortgage or not.
How to save money for a house
Consider regular savings
Once you know how much you need to save, it’s time to create a plan! Write down a list of your monthly income as well as any expenses. Work out how much is left each month and consider how much you could set aside to save money for a house, comfortably. It’s really important to also save some money aside for emergencies and any other expenses that might crop up though.
Even if you’re only able to start putting away $50 (or £50) a month to begin with to save money for a house, it’s a start and can always be increased later down the line. It’s better to start off low rather than get into debt every month just to save. To help you out, you may want to set up a standing order for the day after you get paid so you don’t even need to worry about keeping the money aside.
Think about where you want to save money for a house
As Monzo has reported, while you could put your money into an everyday savings account, there are other options that might actually increase the amount of money you have. For example, a long-term savings account may come with a higher interest rate, or investing in bonds could boost your savings.
You might be saving for a few years too so it’s important to review your savings accounts regularly. Is the interest rate still beneficial? Could you get better service if you switched accounts? Pop a note in your calendar for every new financial year and spend some time looking at alternative options to help save money for a house.
Cut your current costs
It might sound simple but one of the easiest ways to save money for a house is by spending less – so take a look at your current expenses and see where you could save:
- Could you move back home to save on rent? Or move in with a friend?
- Can you downgrade your cellphone contract for the next year?
- Why not opt for nights in instead of eating out?
- Consider swapping your morning coffee on the commute for one you’ve made, and start taking your lunch too.
- Review all monthly subscriptions to see if you could go without any for the next few months.
Prepare for additional expenses
One of the great misconceptions of those who prepare to save money and buy their own home is to disregard the expenses related to deed and documentation. The purchase of a property involves some bureaucracy: in addition to paying the bank’s papers, the buyer needs to be aware of the property purchasing taxes, which can vary depending on where you live, according to the municipality, notary’s costs, legal analysis of documentation, evaluation of the property, among others.
In order not to have surprises and need to postpone the purchase of your property, schedule yourself to allocate part of your reservation to these expenses.
In addition, it is necessary to consider that the routine in a house also brings additional expenses. Financing can compromise up to 30% of your income, but it is important to consider the costs of consumer bills – such as water, electricity and telephone – insurance, condominium, property taxes and food expenses, which also weigh on the budget. Do the math, always thinking long-term, to understand if the costs of this property, including those implicit, really fit in your pocket.
The latest real estate launches have presented very complete leisure infrastructure, which usually makes the cost of condominiums more expensive. In this scenario, the consumer needs to understand what he will really use so as not to end up paying for something that at first glance draws attention, but then he does not use it.
Just remember, as Which? point out on their helpful online blog, every month saving is a month closer to jumping up a rung on the property ladder. While you might have to cut back in some areas or miss out on a few nights out with your friends to save money for a house, it really will be worth it when you’re in your brand new home. The most important thing to note is how much you need to save. Once you’ve determined this, make a plan and get started!