When you’re saving for a house, you are essentially saving up for a deposit. In the UK, that usually means between 5% and 20% of the value of your home. This could be more than £20k, which is a number that can be a bit daunting at first. The good news is there are a few steps you can follow to get started on your path to owning your home.
It’s good to start with an approximate range of what the total value of the house or flat you want to buy. Which neighbourhood do you want to live in? Do you want to live in the countryside or in the city? In a house or a flat? Do some research on your ideal house or flat to give you an idea of what kind of mortgage you’ll need to take on.
Once you know the approximate value of the house you’ll be buying, take 20% of that number and that will be an estimate of the total amount you need to save up. It’s an estimate because as you’ll see below, there are some government schemes and help in place that might mean you won’t have to save as much.
Once you know the total amount you need to save for, you can start creating a savings plan. Keep into account that you will also need to factor in costs of conveyancing, valuation fees, application fees and more.
It’s also worth looking at a few government schemes for first-time buyers that will help you reach your goal faster. For example, with the Lifetime ISA, the UK government will add a 25% bonus every year up to £1,000. This is free money which you can then use to buy your house! It’s also worth looking into a Help to Buy loan scheme, which allows first time home buyers to borrow 20% of their deposit if they meet certain requirements.
Once you know how much you can get from the government and any support you need, you simply need to reverse engineer the number. How much can you save every month? If you can save £200 per month, you’ll reach a deposit of £15k in just over 4 years. This may seem like a long time, which is why it’s worth trying to save more or put your money into an account with a higher interest rate. If you save your money in gold, for example, your money will increase with inflation and maintain its value over time.
Everything is easier with a plan. Now, all you need to do is start saving! The best method is to set up a direct debit to your savings pot so it happens every single month without fault.
With a monthly payment plan like the one we offer at Minted, you’ll be saving every single month and won’t have bulk buy gold. It’s also good practice to check your savings pot and review your savings plan every now and then to make sure you are maximising your ISAs and making the most of government schemes.
If you’re serious about saving up for a deposit as soon as possible, you may need to reduce some expenses. It doesn’t mean life has to be boring or a drudge; just start by cutting out expenses that don’t make you happy or add value to your life. Don’t go to the gym? Cancel the subscription. Don’t need to travel that far for holidays? Do staycations instead.
Get creative with your expenses and find ways to pick alternatives. Once you do reduce an expense, take that saved money and immediately add it to your house deposit pot. You’ll get a dopamine boost from seeing your house deposit increase. Do that a few times and reducing expenses won’t be as painful as it used to be!
There are a few other options that can help you save more money or decrease the deposit you need to buy a house. You can buy a property with a group of friends or family through something called a “joint mortgage”. The income from the two highest earners is taken in order to assess the mortgage, but everyone pays for the mortgage. You can do this with family members you intend to live with or anyone who wants to help you afford a house.
If your parents are in a position to help, you can also ask them for a cash gift or loan. Their contribution would appear at the moment you buy your house and it would help reduce the total amount you need to save.
Another other option is to look into shared ownership schemes where you buy part of the house and rent the rest at a reduced rate. The main negative is that you won’t be able to benefit from property appreciation and you will still need to commit to monthly payments.
Finally, you can also look into the Help to Buy government loan scheme we mentioned earlier, which allows you to deposit 5% of the mortgage value and loan the rest. The loan is free until the 6th year which is when you’ll need to start paying interest.
Buying a house is not a straightforward and fast process; it requires planning, budgeting and thinking ahead. But it doesn’t mean that it should be unenjoyable or arduous; turn it into a fun challenge that will allow you to become homeowner! And if you want to keep your money somewhere safe while you’re saving up, gold is a great option.