We’ve already looked at how to get on the property ladder (including Help to Buy schemes), but one of the biggest hurdles to buying your first property is saving up for the deposit and fees. With rising house prices and living costs, this can seem impossible to achieve.
Self-made millionaire David Bach recommends that you “brownbag your lunch every day”, but while this will certainly help, is it the only answer?
How can you save a deposit for your first home in record time?
How to save a deposit for your first home in record time
1. Set your goal and stick to it
Consult a mortgage qualified independent financial advisor to determine what mortgage you can afford and how much you will need to save for your deposit and fees. Once you know this number, start saving towards it in a dedicated account. As a first time buyer, you may be eligible for a Help to Buy ISA, where the government will reward you with a 25% bonus on your savings (up to £3000).
Work out how much you can afford to save each month (see below) and set up a regular standing order to transfer this to your savings every payday.
If you have any money left at the end of the month, transfer this to your savings too.
2. Use technology to budget and make savings
Use online banking to track all your incomings and outgoings every month. Carefully analyse this and decide where you can reduce spending (or cut it out altogether).
Budgeting apps can help you to track your spending, alert you when you go over budget, easily see where you are ‘leaking’ money and stop you from overspending.
Before you buy anything, consider if you really need it. If you do, check the best price for it online, or use a price comparison app and see if there is a discount code or voucher available to use. When buying online, make your purchases through a cashback site and earn 1-5% back.
3. Socialise creatively
Give up luxuries like a daily take away coffee, going for cocktails and eating out. Consider alternatives that will save you money. You might host a movie night with DVDs and popcorn instead of going to the cinema. Or get together with friends for a poker night where everyone brings along drinks and snacks instead of meeting at the pub. Save the money you would have spent on a manicure and enjoy a pamper evening at home with your best friend instead.
4. Save money that you won’t miss
Any time you have a windfall or bonus, put it straight into your savings. This is money you weren’t expecting to have, so you won’t miss it.
As and when your circumstances change for the better financially (for example your tax code changes, giving you more take-home pay, you finish paying off a credit card, loan or phone handset), put that regular monthly outgoing into your savings instead. You won’t notice any difference to your lifestyle, but your savings pot will accrue much faster.
5. Reduce your rent payments
It’s hard to save a deposit for your first home in record time when a third of your income is spent on rent. Consider how you might reduce this significant outgoing. Could you move in with your parents while you save? Perhaps you could share with other people and split the rent? Could you rent somewhere cheaper and ‘rough it’ for a while in a less desirable area?
You may be able to take in a lodger to supplement your rent (however this is not always allowed and you should check beforehand).
Another option to consider is property guardianship, where you live in an empty property and pay a nominal rent. There are pros (you might get to live in a stately home for next to nothing!) and cons (as a property guardian you don’t have the rights of a tenant), but for young professionals with few commitments, this can be an excellent way to save on rent while building a deposit fund.
Find out more about the ins and outs of property guardianship at Moneywise.co.uk
6. Take it to the extreme
There are many more unusual ways to save money.
Money Saving Expert tips for extreme saving include:
- – repeatedly switching your bank account
- – entering competitions
- – using homemade beauty and cleaning products
- – flushing the loo with rainwater
With some luck, these money saving tips will help you save a deposit for your first home in record time and enable you to get on the property ladder in one year.