Tips for Saving When Buying a House

Tips for Saving When Buying a House

Buying a house is one of the most stressful things a person can do. Especially when house prices are skyrocketing and deposits requirements are getting bigger. If you’re committed to the idea of purchasing a new home there are a few things you need to monitor. Most importantly, you can’t buy a home without a deposit! With that, you’ll also need to set aside an extra couple of grand for solicitors fees, agency fees, survey costs, etc. Fortunately, we’re here to provide you with a few handy money-saving tips to help you get your finances together. As well as some general advice on buying a house.

How much money should I save before buying a house?

The absolute minimum deposit you will want is 5% of the overall cost of the house, plus money for legal fees. So say for example you’re looking at a house for around £120,000, you will need a minimum deposit of £6,000. However, you will also need to ensure you have enough money to cover the legal costs to save yourself a headache later down the line. With that, I would suggest an additional £1,000-£2,000. Legal fees can be paid using a loan, but if you can cover those costs outright you can move into your new house with only the mortgage to worry about.

saving for buying a house
Image credit: Canva

The best bit of advice we can give you, however, is to aim for 10% of the value of the house if you can. Mortgage applications with a 10% deposit are far more likely to be accepted. (speaking as a voice of experience having had an agreement in principle for a 5% mortgage but having the application refused at the final stage.) Though, generally speaking, the bigger the deposit the better the deal! If you can get 15%+ gathered together before looking for a mortgage, you could save yourself a lot of money in the long run.

How do I work out how much I can borrow?

Once you’ve figured out how to get a deposit for a house, you’ll want to give yourself an idea of how much to aim for. The less you earn, the smaller the mortgage you will be offered. The same goes for the size of your deposit. If you can only offer a small deposit, then the mortgage offer will reflect that. Additionally, single people are unfortunately less likely to be offered a large mortgage. However, couples typically have a much easier time of it.

If you’re wanting to figure out how much you could borrow in order to start planning your deposit, you can always get an idea using a mortgage calculator.

What is the fastest way to save for a house deposit?

Saving for a house can feel a bit daunting. Some people can have some real difficulty saving for a house deposit; government schemes don’t tend to cover this part. The first thing you absolutely need to do is set up a separate savings account from your usual one. Keeping all of your savings in one place will help you to monitor your progress without the money becoming muddled with other savings you may already have.

Find The Best Account For House Savings

The best account to save for a house deposit would be a standard savings account. Savings accounts often pay up to 5% interest on the money you put in, so you’re getting a little bit of help from the bank too. When you start checking out your options, be sure to also check what the deposit limitations are on the account. Every bank has its own limit as to how much you’re allowed to put into the account each month. The limits can range from £30-300 and have a huge impact on how quickly you can save your deposit. The higher the limit, the faster you can save.

Cut Back on Your Finances

Take a careful look over all of your outgoings and see where you can cut back. Here are a few tricks I used when saving for my own house:

Create a menu

When you carefully plan out all of your meals each week you would be amazed how much money you can save! You save on impulse buying, which is something we’ve all done when we’ve gone food shopping whilst hungry.

Delete shopping apps

Getting rid of shopping apps on your phone can help you to avoid window shopping in your downtime. Window shopping can lead to impulse buying. Impulse buying is often a waste of money.

Remove monthly payments you don’t absolutely need

This includes things like magazine subscriptions, Youtube subscriptions, Patreon memberships, charity sign-ups, and gym memberships. If you don’t absolutely need it, remove it and come back to it once you’ve sorted your deposit. You won’t just save money faster, but it will act as an incentive to get your money together quicker in order to gain those luxuries back.

Work overtime

The best possible way to may more money. If you have no way of reducing your outgoings and still want to be able to save more, the best solution would be working overtime. Of course, this isn’t always an option for everyone. But if your job allows it, try to squeeze in a few more hours.

Switch to cheaper alternatives

It may not be ideal, but it’s effective. Say you prefer Heinz ketchup, switch to Tesco’s own. Do you usually go for premium fuel? Go for a standard instead. Go for Nicky toilet paper instead of Andrex. You can rapidly save a neat little chunk by switching to cheaper brands – at least for the time being.

Get a money tracking app

There are tonnes of money tracking apps around to help people curb bad spending habits. Try taking a look at something like Monefy or YNAB (You Need a Budget).

buying a house new built
Image credit: Canva

Check Out Money Saving Schemes

If you’re a household on a low income, you should take a look at the saving schemes available. The government offers certain schemes that can assist low-income households with their savings for several years. The Help To Save Scheme offered by the government provides bonuses at certain intervals over 4 years. The bonus will be solely based on how much the account holder has managed to gather together in that time. If this sounds like something that would be a good idea for you, be sure to check out all of the details on the government website.

Is 2022 a good year to buy a house?

When saving for a new home, it’s a good idea to set yourself a goal. Setting a time frame for yourself can you help you to manage your savings. It will also keep you from dipping into them when it’s not necessary. We all know that house prices are risen dramatically post-Covid, with an average rise of 9.7% across England. The difficulty is not knowing when they will come back down.

Multiple companies are in the throes of attempting to predict the housing economy. Though the general consensus seems to be that house price escalations are expected to start slowing back down in 2022. Though educated guesses are helpful, predicting the future is an impossibility. Therefore it comes down to you as to when you feel you should invest. Once you have your deposit together it may well be worth just biting the bullet. As once you have your first house you will be on the ladder and won’t have to worry about prices again until you move (if you do.)

What is Help to Buy?

When it comes to figuring out how to buy a house, UK residents are fortunate enough to have the option of help from the government. The government currently offers a Help to Buy Equity Loan scheme to assist first-time buyers over the age of 18 in purchasing their first home. The house needs to be a new build and must fall within the price limit set out by the scheme. The Equity Loan Help to Buy scheme will be running until March 2023. So if you think it would suit your needs check out further details on the government website including price limitations and how to apply. 

So when it comes to purchasing a house, it’s not going to be a picnic. You will have to cut back on some luxuries and have to take a serious look at your finances. Budgeting can be a pain, and lack of luxury combined overtime can be frustrating. But if you really want to get that house, you’ve got to work for it. There are no shortcuts or easy ways. You can’t just get a loan. It’s done by the sweat of your brow. But it’s worth it!

Eloise

Eloise

Eloise is a lifelong gamer, a studier of Ancient History and Archaeology, a pet care journalist, a new mother of one, and film studies graduate with a desire to pass on her own knowledge so that others may benefit from it.

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