If you’re wondering how to save for a house – I hear ya! A house is probably one of the biggest – if not the biggest – investment you’ll ever make in your life. So that makes saving for that all-import deposit a little harder. Whether you’re buying alone, or with a friend or partner, there are plenty of options to help you get those keys even sooner.
Between travel plans and Coronavirus, I’m not ready to settle into a permanent home just yet. But just because I’m yet to find the right time to buy my first home, doesn’t mean I can’t share with you how I’m saving for my deposit.
So without further ado, let’s dive in.
Saving for a house deposit: My journey
I’ve long been a believer that talking about money is a good thing. Whether it’s what you earn or savings tips, sharing can help us learn a lot – and motivate us too. Knowledge is power, after all. Not only can it help you save more money, it can help you know how much your skills are worth as well. It’s a win-win.
So here it goes… As of January 2021, I have just over £51k in savings. Those savings aren’t just for a house, they are for travel too (curse you itchy feet!) and any other unexpected issues that might pop up, like car repairs.
I won’t lie to you and pretend I saved that money overnight. Far from it. I started saving seriously in mid-2017, just after I turned 24. At that time, I had not long since returned from a year teaching in Japan and had started a new career in marketing. After working hard and moving jobs a few times, I had saved around £45k by September 2019. At that time, we embarked on what was meant to be our big world travel journey. We had planned to see the world and work for a year in Australia, but unfortunately Coronavirus had other plans. So, after 6 months travelling Asia, 5 more working in Melbourne’s stage 4 lockdown, and a few more working freelance back here in the UK, I am now at my current savings pot of £51k.
So, what have I learned about saving for a mortgage deposit? Here are my top tips for saving for a house.
Get on the property ladder with a Lifetime ISA (LISA)
This is by far one of the easiest ways to save for your first home. With this ISA, you can save up to £4k a year, tax free. And the best part? The Government will match 25% of your contribution each tax year – meaning you could get up to £1k free each year. Kerching!
When you open your LISA, you will have the option to open a Stocks and Shares ISA or a Cash ISA. As with all stocks and shares ISAs, your money can go down as well as up, so make sure you consider these risks before opening. I personally opted for a Cash ISA because I am not willing to risk losing my house deposit. However, for those of you who are less risk averse, it can be a great way to get around the current slump in interest rates.
But before you rush to the bank and open your LISA, beware! Any money invested into a Lifetime ISA can only be used to buy your first home or for your retirement. If you want to withdraw your money for any other reason, you will lose 100% of the Government’s cash bonus plus £6 for every £100 you invested. So if you need to keep your cash flexible, this may not be the best option for you.
Ask for a pay rise – or move jobs!
While in the current Coronavirus climate that may not be so simple, it has served me well in the past. In a previous role, my manager was fired unexpectedly from her post as Marketing Manager. As a result, I was left to absorb her role into mine until a replacement was found. Since I was doing the job already, I decided to apply for the Marketing Manager role but was sadly unsuccessful. This wasn’t exactly surprising considering my lack of experience, but I always think it’s the things we don’t do that we regret! And while the very long search for a new manager continued, I was still running the department alone.
After a little tug of war with the MD, I managed to secure a temporary pay rise until a new manager was appointed. However, neither the money or the treatment I received really matched the value I was adding to the company. And it certainly didn’t compensate for the many, many, MANY extra hours I was working for free to get the job done. I was even getting work calls and messages on my tour of the Vatican whilst on holiday in Rome!
So, instead of accepting the treatment and sticking it out, I found a new job. And got a 50% pay rise over my last role. The new company gave me a better work-life balance, and some great experience in a new industry. So, all in all, it was definitely worth it.
My mantra is: if you feel you are worth more, ask for it. And if you don’t get it, move on. There are plenty of businesses out there who will value your skills.
Is your current home scuppering your mortgage savings?
While none of us want to live like students forever, (if you do, that’s cool too), your current home could make all the difference to your savings. Whether you decide to move back in with your parents, look into a house share, or rent a home in a slightly less expensive location, these are all great ways to boost your savings each month. This may seem like an extreme option, but if you are able to move it could be your single biggest saving each month.
Ask yourself if you really need to live alone. Or if you need to live in the city centre. If the answer is yes, and city centre living saves on expensive commuter costs, then definitely stay put. But if your choices are unnecessarily costly, this can be a great place to save. Our rent and bills are our biggest monthly expenses, after all.
For example, I am extremely lucky that my boyfriend owns his own home. He rents out rooms and uses that rent to pay off his mortgage. Because of this, I am able to live with him very inexpensively. I recognise I am very fortunate to be in this situation, and while this isn’t an option for most, it can really mean all the difference between buying a house sooner rather than later. The only time I have lived alone was when I lived in Fukuoka, Japan. The rent was subsidised by my company, and made living alone in a city very affordable. Other than that, I have always either lived in either a house share or with my parents. While the constant pile of washing up next to the sink drives me crazy, I know it will be worth it in the end.
Save on your bills to save for a house
We talked about saving money on rent – but this could apply to all of your bills and daily spending too. Own your own phone? Consider switching to an affordable SIM only contract. Love clothes? Check out thrift stores or sell old clothes you hardly wear before buying new ones. There are plenty of ways to reduce your day-to-day spending without compromising on the things that make you happy.
For us, we decided to cut back on our car costs after my partner was in a car accident. Everyone involved was absolutely fine – apart from Dan’s fateful Volkswagen Fox, that was written off. After he began searching for a new car, I decided it would be better for our savings if he used my car for his long commute to work. I then bought a second hand bike from a local car boot sale and began cycling to and from work each day. While I certainly regretted the decision on rainy mornings – actually, who am I kidding? – most mornings! It was a great way to save more money towards a house deposit and make sure I got some daily exercise.
Side hustle your way onto the property ladder
A side hustle is one of the best ways to increase your income. They can take a little time before they start earning you some money, but they are usually well worth it in the long run – even after you’ve finished saving for your mortgage deposit.
That’s right, diversifying your income can be one of the best moves you ever make. Not only does it offer a safety net if you unexpectedly lose your main source of income, it can be a good way to learn new skills, make money from your hobbies, or give you a bit of extra spending money each month. A side hustle can be anything you want it to be – a business selling your creations on Etsy, freelance design work, or even selling things on eBay. The only limit is your imagination.
My Side Hustles
I have a number of side hustles, each of them flexible so that I can work on them as I travel. My first side hustle is my copywriting and marketing business. I work with companies around the world to help them with their marketing and copy needs. This started by accident when I was living in lockdown in Melbourne. A number of old contacts reached out to me asking me to help them on a freelance basis, and out of nowhere my freelance career was born.
My second side hustle is teaching ESL classes online. I like PalFish because it is flexible and I can use a phone instead of a computer, but there are plenty of platforms out there. I already had my TESOL Certificate from my teaching experience in Japan, but if this sounds like something you’d be interested in, you can pick one up online for as little as £15 on sites like Groupon and Wowcher. Want to know more about PalFish? Check out my blog post on making money teaching ESL online. Or if you’ve heard everything you need to know, you can get started teaching online right now.
My final side hustle is this blog. Writing has always been one of my passions, so writing about things I enjoy online is a fun way for me to earn a little extra cash. So, when thinking about the side hustle that’s right for you, make sure you consider what you love to do, and where your skills lie. Once you’re doing something you love, it doesn’t feel like work at all.
Earn cashback on any money you spend
There are great ways to earn money back as you spend. The best ways to do this are with cashback credit cards or savings accounts, or with cashback sites like Quidco and TopCashback.
How do they work, I hear you ask? Once you have created your account with one of the sites, you can search from thousands of online retailers. Many retailers have deals with cashback sites so that any time you buy from them, they will offer you some cash back in return. Simply click on the retailer of your choice and you will be directed straight to their website – just make sure you have any AdBlockers disabled! This can stop the retailer from tracking your purchase, and you’ll lose your cashback.
How much money do you need to save for a house deposit?
To secure a mortgage you need a 5% deposit. Put simply, if you want to buy a property that costs £250K, you will need at least 5% of that in cash, which is £12.5K. But, to ensure you get the best possible rates, you should put down as much cash as you possibly can. Why? Because mortgages are loans you will likely be paying off for at least 25 years. To make sure you aren’t paying through the nose, having a little more cash in your deposit can be a great start. I am personally aiming for a 20-25% deposit when I purchase my first home.
Good luck and happy saving for your mortgage deposit!
Thank you for reading this post. I wish you the best of luck in saving for a house deposit. Getting a mortgage can feel difficult, but sometimes all it takes is good financial planning.
Do you have any other great ideas that have helped you save for your house deposit? If so, I’d love to hear about them in the comments.
Please note: Sophie On Demand does not offer financial advice and nothing in our posts should be construed as advice. Our publications provide information and education for individuals who want to know more about their saving and money making options.