Are you dreaming of owning your own home but unsure where to start? With bills, rent and student debts, affording a deposit may seem impossible. But with some careful planning, you can make your dream a reality.
From a Lifetime ISA to budgeting apps, check out our top ten tips for saving up for your house deposit.
1. Work out how much you need to save
The first step is working out how much you need to save. Usually, you will need to pay a deposit of at least 10% of the property value. So, if the property value is £140,000, a 10% deposit would be £14,000.
A higher deposit will give you better mortgage deals with lower interest rates.
Check out the deposit calculator tool on moneysavingexpert.com to see how much you will need to save.
2. Cut out some luxuries
It might not be fun but cutting out some luxuries is the best way to ensure you spend your money on what you really need.
Keeping a record of how you spend your money right now will help you see where you need to make changes. It can be motivating to see how much you could save in a year just by cutting out takeaway coffees!
You could also consider cancelling subscriptions, at least for a little while. According to a study by Zuora, we spend an average of £44.50 per month on subscriptions. That’s a whopping £534 a year on subscription services!
3. Download a budgeting app
Budgeting apps can help you keep track of your spending. They also save you from having to input all your expenses in a spreadsheet.
Emma is a free budgeting app that connects to your current account. This allows Emma to automatically track and categorise how you spend your money. The app will also notify you if you are spending too much and praise you when you meet your goals.
If you’re worried about the safety of budgeting apps, read up on Emma’s security policy here.
4. Consider sharing or moving in with others
If you are renting on your own or with a partner, you will be spending a sizeable amount on rent. By moving in with friends or your parents you will be able to put more money into your savings.
You could also consider a house share or a lodger, if moving in with family and friends isn’t an option.
5. Reduce your household bills
You can cut expenses by spending time comparing the best energy bills. Check out Money Supermarkets calculator to find your best deal.
By switching off household appliances, turning down the thermostat and investing in energy-saving lightbulbs, you can reduce your energy bills further. Plus, you’ll be helping the environment at the same time!
6. Get cashback on purchases
You can earn cash rewards when shopping online by clicking through to your favourite shops from a cashback site. Cashback isn’t guaranteed but it can be a nice little bonus when approved!
You’ll also get rewards for referring friends and if you withdraw funds in gift card form, you’ll receive a little extra.
7. Lifetime ISA
Setting up a Lifetime ISA is one of the best ways to increase your savings. To apply you need to be over 18 and under 40. You can put up to £4000 a year into the account until you turn 50.
In return, the Government will provide a 25% bonus to your savings (maximum £1000 a year). After turning 50 you will gain interest on your savings but won’t be able to pay into your Lifetime ISA or earn the 25% bonus.
Your savings can only be withdrawn if you are buying your first home, are aged 60 or over, or are terminally ill. If you withdraw for any other reason you will need to pay a 25% penalty on the amount withdrawn.
8. Invest in Premium Bonds
NS&I Premium Bonds function as a savings account where the interest paid is determined by a monthly prize draw. You can increase your chances by buying £1 bonds.
Winning is certainly not guaranteed and is unlikely if you only have a small sum in your account. The more money in your account the higher your chance of winning and you can withdraw from your account whenever you wish.
You can use the Premium Bonds Calculator to find out what your chances of winning would be.
9. Consider Shared Ownership
Shared Ownership allows first time buyers to purchase a share in a new build property. You purchase either 25% or 75% of the home and pay rent for the rest. The remaining share is owned by a housing association.
You can increase the percentage of the share you own over time and can ultimately become the full owner of the property. However, property prices may go up or down during this time which will affect the cost of future shares.
You can find out more about shared ownership on the GOV.UK website.
10. Apply for a Help to Buy equity loan
The new Help to Buy equity loan is available between 1 April 2021 and 31 March 2023. You will need to be a first-time buyer of a new build home to be eligible.
For the Help to Buy equity loan, the government will lend you up to 20% of the cost of your new-build home. In London, the loan can go up to 40%. You will need to pay a deposit of at least 5% and a mortgage to cover the remainder. For the first five years of owning your home, you will not be charged interest.
If you pay off your mortgage, sell your home, or come to the end of the equity loan term, you will need to repay the loan. You can pay off your equity loan at any time before that.
You can apply to the Help to Buy Equity loan scheme even if you have a Lifetime ISA.