Saving for your Dream Home
Everyone has a different reason to own their own home. Be it moving away from your parents’ house, raising your own family, or moving for a new job or opportunity. The reason may be different but the issue is still the same – how do you afford the deposit?
From recent reports, it takes an average of 8 years to save a 20% deposit for a house. This is based on saving 15% of your take-home pay. We know this isn’t always possible and many people end up relying on their parents and other family or borrow credit to put towards their first home. You could also look at a Help-To-Buy Scheme, but this can reduce the amount of properties that you could purchase.
If you’re looking to purchase a property, the first thing you need to do is work out how much you need to save towards a deposit. This will depend on the mortgage provider – some banks and building societies will lend the funds based on a 10% deposit; however, this might mean your overall mortgage payments are higher or it may take you longer to repay it.
The next avenue you will need to explore is how long do you want to save for. This will depend on the price of the property that you’re looking to purchase and, also how much you want to save each month.
For example, if you’re looking at a property valued at £120,000 and are looking at a 20% deposit, that’s £24,000. Next, you want to buy it within the next 5 years. Saving money in an account that doesn’t provide any interest will mean that you should set aside around £400 per month. Not always the easiest thing to do.
What you will need to do is work out your budget. People have different ways of doing this. Maybe you’re like me and love a spreadsheet – that’s how I keep track of my incomings and outgoings. My friends use apps on their phones. My husband’s bank tells him where he’s spending his money and tracks it for him. Whatever works for you – but make sure it does work for you and you’re happy with it. If you’re not committed to your budget you’ll find it a real struggle to save what you need to.
If you’re finding it difficult to decide what you need to do to get your savings up, think about where your money goes and decide if you really need to be spending it.
We have done some quick calculations using the handy Quick Cash Finder available with the Money Advice Service to see how much you might be able to save if you cut back on a few luxuries. This is what we discovered:
- If you stopped buying your daily coffee on the way to work, there is the potential to save around £780 per year
- Are you a smoker? As hard as it can be to give up, you could save up to £2,737 per year
- Stopping ordering takeaways and buying lunch out could save you around £2,340 per year
These are just some of the savings you might be able to make!
Here are some more suggestions that we gathered:
- If you’re renting somewhere and you could move home, then do it. The money you would be putting towards rent can go towards your deposit and since you’ve already been paying it out each month, it won’t seem like such a sacrifice.
- Already renting and can’t move home? Maybe have a spare bedroom? Get a roommate to help you cut the costs of the bills. Just double check your tenancy agreement first!
- Do you get money from family for birthdays and Christmas? Put 50% of it away in savings as soon as you get it – you probably won’t even miss it!
- Sell any unwanted items online – you’d be surprised how much you can get for your unloved goods!
- Meal plans and bulk cooking – one of my favourite ways to cut back. Especially if you swap your groceries for the likes of supermarket own labels, instead of the big brands.
- ‘Tidy’ your bank account – are you paying out on insurance for a phone you no longer have? Do you really need that expensive gym membership? And what about your subscriptions, how often do you actually listen to Spotify?
While saving for a deposit may not always be easy, with some clever budgeting it might be easier than you think. And just remember what you’re saving towards – your own little patch of paradise!