5 tips on how to save for a house
If you’re thinking about buying a house, you’ll need to save for a mortgage deposit. House prices vary across the UK, so how much to save to buy a house will depend on where and what you’re looking for. Take a look at some of our available homes below and use our 5 tips to get started on your home-buying journey.
1. Work out how much you'll need to save
First time buyers generally need to have a deposit of anywhere between 5% and 20% of the property price. A recent study by Statista shows that in 2021, the average first time buyer deposit across the UK was £53,935.1 However, house prices differ widely across the country, so a deposit in the North West will be much smaller than in Greater London.
Average Deposit in the UK in 20211
|Yorkshire and the Humber||£31,212|
If saving up a deposit seems a bit daunting, there’s good news. We have a range of schemes to help you make your move. Available to both first time buyers and existing homeowners, Deposit Unlock could help you buy with just a 5% deposit. And then there’s Deposit Boost. As the name suggests, if you have a 10% deposit, we could top it up by a further 5% of the purchase price.
It stands to reason that the larger the deposit you save, the less a bank or building society will need to loan you through a mortgage. They’re also likely to view you as a lower risk borrower, so you could get access to better mortgage rates.
Working out the cost of a mortgage can be tricky. The Government-backed MoneyHelper website has a useful mortgage calculator. It’s also a good idea to speak to a Mortgage Adviser about the size and type of mortgage you can realistically afford.
Remember, when buying a home you’ll also need to save for more than just a deposit. To avoid any nasty surprises down the line, don’t forget to factor in things like:
- Stamp Duty
- Valuation fees
- Mortgage arrangement fees
- Search, survey and Land Registry fees
- Legal fees
- Buildings and contents insurance
- Council Tax
- Money transfer fees
- Removal costs
2. Could you reduce your spending?
With inflation on the rise and the ‘cost of living crisis’ affecting us all, reducing your outgoings might not seem easy. However, it can really help you save up the money you need to buy a house.
You may find you can make savings in unexpected places:
- If you’re renting, could you move somewhere cheaper or spend time back home with family?
- If you own your current property, could you get a lodger in?
- With energy and utility bills going up, could you reduce your energy use?
- How about downgrading your phone or broadband packages?
- Are you paying for subscriptions, memberships or services that you don’t really use?
- Could you cancel or downgrade your gym membership and exercise in the local park?
Budgeting is key when saving for a mortgage deposit. Cutting down on your everyday spending might be hard but how about non-essential things? If you eat out or get a lot of takeaways, travel by taxi, or regularly grab a coffee (and a pastry) the costs can soon add up.
There are different banking and financial apps out there that can help you sort your spending into categories and spot areas where you might save money. And when it comes to finding a cheaper energy or utility supplier, websites like MoneySuperMarket, MoneySavingExpert and USwitch are good places to start.
3. Be resourceful and see if you can boost your income
A bit like looking at your spending, you might be surprised to discover that you could make more of what’s already at your disposal.
- Got a lot of stuff? Have a bulk clear-out and sell unwanted items on sites such as eBay, Gumtree, Depop or Vinted.
- Maximise any reward or loyalty point schemes you’re signed up to
- Cash in any unused gift cards you’ve been waiting to use
- Got a hidden talent? Freelance and share your skill or set up an Etsy shop
Some financial products and accounts can help boost your savings too.
Cashback credit card – earn a percentage of what you spend as a credit on your bill. Good for everyday spending, but make sure you pay off the balance in full each month to avoid paying extra interest.
Savings account – earn interest on any money you put away. Some accounts will offer you a better rate, but only if you agree to keep your money locked in for a set period of time. If you’re looking to buy a home soon, you might need to get your money out quickly, so choose an account with instant access.
Individual Savings Account (ISA) – you can invest up to £20,000 into an ISA each year and get tax-free interest on the money you’ve saved.
A Lifetime ISA is particularly attractive to first time buyers. As long as you make your first investment before you reach the age of 40, you can then put in up to £4,000 a year until you’re 50. The Government will add a 25% bonus each year (up to a maximum of £1,000) and you can withdraw the money without any charge to help you buy your first home.
There are many other types of ISA available, so shop around and maybe talk to a Financial Adviser to see which one is right for you.
4. Buy with someone else
Sharing the load can make it easier save for a deposit. So you might consider buying with a partner, relative or friend. However, there are risks involved, so it’s wise to talk things over with a legal adviser to make sure everyone knows where they stand.
5. Take advantage of home buying schemes
There’s no escaping the fact that pulling the money together to buy a home can be a challenge. Which is why there are schemes designed to help reduce the amount you need to save. Two of our most popular schemes are:
Exclusively available on selected new-build homes, it enables first time buyers and existing homeowners to buy with just a 5% deposit and a 95% mortgage. It also gives people access to competitively priced mortgage products up to £750,000.
If you have a 10% deposit, it means you could increase it by an additional 5% of the sale price – giving you 15% deposit in total. That means you could borrow less from a lender and maybe secure a more competitive mortgage rate.
While saving for your first home is challenging, having your own home is a goal for many of us. And with no rent to pay, you could save more money in the longer term.
Can you see yourself in a brand-new, energy-efficient home that’s designed to make day-to-day living easy?
1 First time buyer average deposit in the UK from 2020 to 2021, by region. Statista, 2022.