14 Essential Tips on Saving Up for a House
May 10, 2022
When to Start Saving for a House
How Much to Save for a House
Key Takeaways
Pay Off Debt
Pause Other Forms of Saving
Build a Budget
Consider Downsizing
Get a Second Job or Side Hustle
Establish a Passive Income
Discard Bad Habits
Skip a Holiday
Reduce Your Bills
Cut Back on Everyday Spending
Ask for a Raise
Ask for Gift Money
Open a Savings Account
Seek Help
Be Patient
Conclusion
Buying a house is a big step, requiring substantial savings. If you’re planning to buy a home, this guide will help you understand how to save for a house, how much money you’ll need, and the best time to start saving.
When to Start Saving for a House
When it comes to saving for a house, what is the best advice? The sooner, the better. As soon as you begin thinking about purchasing a home, you should start putting money aside. Some experts even recommend that you start saving as soon as you get your first job.
But the time you need to save enough for a down payment on a house depends on numerous factors, including the property cost, the percentage for a down payment, your income and expenses.
DID YOU KNOW? Most UK citizens wait until they’re 30 years old to start saving money for a house—although most had planned to begin at 27. |
How Much to Save for a House
Once you decide to save money for a house, you should set a goal on how much you need based on the following:
- The type of property you want to buy
- The cost of property in the area you want to buy
- How much you need for a down payment
- How much you can afford in mortgage repayments
- Whether you have financial help from your family
It’s essential to remember that you’ll need at least a 5% mortgage deposit, but it’s even better if you manage to save more (7% to10%). You can access cheaper mortgages with lower interest rates if you have a larger deposit.
So how much should I save for a house? You’ll need to calculate the cost of all of the aforementioned factors, plus the property purchase costs.
DID YOU KNOW? A UK adult has average savings of £9,633.30, but the saved amount varies significantly among different age groups. About 40% of people in the 22–29 age group have zero savings, while those aged 45 to 54 have the most savings at £133,900. |
Key Takeaways
People should start saving up for a house when they get their first job or begin thinking of buying a home. |
The deposit needed depends on the type of property, property cost in the area, income, expenses, etc. |
Some effective saving approaches include paying off debt, building a budget, downsizing, reducing bills, cutting back on everyday expenses, and opening a savings account. |
Saving up for a house can take a long time; people need to practice patience. |
How to Save for a House: 14 Effective Methods
As previously noted, saving money for a down payment on a house can be long and arduous. So we’ve compiled a list of effective practices that will help you achieve your goal.
Pay Off Debt
When contemplating saving money for a house, you must first pay off any existing debt or at least get it under control. Carrying debt can make it more challenging to get a mortgage, as one of the first details lenders look at is your debt-to-income ratio. When saving to buy a house, remember that lenders will deem you an unsuitable mortgage candidate who cannot make the monthly repayments if your ratio is high. You would also be offered higher interest rates.
Pause Other Forms of Saving
You’re probably saving for other matters besides a house, such as retirement or your children’s education. It would be wise to speed up your saving by temporarily pausing these different forms of saving. In just a few months, you’d be able to set aside a large sum of money.
Build a Budget
When saving for a house deposit, it’s essential to build a tight budget and stick to it. It’s important to keep track of your spending and identify your most significant expenses. After determining your outgoing costs, divide them into essentials and non-essentials. Separate the non-essential spending into categories and assign a budget to each class, which should help you reduce spending.
Consider Downsizing
Downsizing is the process of cutting back on living expenses. So if you’re planning on buying a home, the best way to save for a house is to downsize. You can find cheaper housing, sell an extra vehicle, or move to an area where living costs are lower. The money you save by downsizing can go directly into your savings.
Get a Second Job or Side Hustle
If you wish to speed up the saving process, start earning more money. In addition to your regular employment, you can get a second job or find a side hustle that allows you to work whenever you have the time. You can freelance and agree only to jobs that fit your schedule. The opportunities are endless.
Establish a Passive Income
When thinking about how to save money for a house, establish a passive income stream, which can be a source that earns a modest amount of money regularly. For example, you can rent out an extra parking or storage space or start an online business. Establishing a passive income is an excellent way to supplement an average salary in the UK, and it can help you save the desired amount quicker.
Discard Bad Habits
If you were wondering how to start saving for a house, one of the first measures you need to take is to get rid of your bad habits. Bad habits (smoking, drinking, eating fast food) are detrimental to your health, but they also cost a lot of money. If you have trouble renouncing your habits altogether, try reducing them, e.g., order takeaway once a week instead of three or four times.
Skip a Holiday
Holidays, especially abroad, are expensive and can set you back by a substantial sum. If you’re trying to save, we recommend skipping a holiday—at least when you’ve just started saving. Instead, you can add the money you had planned to spend on a holiday to your savings; you’ll see an immediate difference.
Reduce Your Bills
You need to know how to manage your finances, and a big part of that is trying to lower your monthly bills. The best way to save money for a house is by reducing your bills. You can try reducing your energy bill or switching providers. You can also look for cheaper broadband and mobile packages. And don’t forget to cancel any unnecessary subscriptions and club memberships.
Cut Back on Everyday Spending
Small, everyday costs can amount to a substantial sum over time. For example, takeaway coffee or shop-bought lunches cost just several pounds per day, but this can amount to more than £1,000 per year. And if you’re thinking about how to save for a house deposit, remember that weekend outings also cost a lot of money. Limit your nights out to one per month, and you’ll save a significant sum of money.
Ask for a Raise
You’ve probably felt that you deserve a raise for a while now. The perfect time to ask for it is when you start saving for your future home. You can put more time and effort into your work or learn a new skill and begin advancing in your field. Asking for a raise then would be justified, and your employer would more than likely accept your request. If they reject your appeal, you can start looking for a better-paying job.
Ask for Gift Money
If you’re still pondering how to save up for a house, you could ask for money as a gift. For example, when your friends and family ask you what you want for Christmas or your birthday, you can tell them that you would prefer cash and then add the money you receive to your savings.
Open a Savings Account
Savings accounts are a popular way to secure the money you’ve managed to save, and they also yield a return that will automatically be added to your savings. If you’re unclear on how to save to buy a house, as soon as you’ve managed to gather a small sum of money, put it into a savings account and make sure you add more each month. Over time, the interest the bank pays for keeping your money in the account will accrue, and you’ll have more money than you saved.
Seek Help
Saving up for a house can take a long time, as down payments must often be substantial. If you have trouble reaching your goal—even over an extended period—you can ask for financial help from your family. If your family is willing and able to help, this could bring you closer to your new home. This is also a recommended practice if you don’t know how to save for a house on a low income.
DID YOU KNOW? Lifetime mortgages are an increasingly popular type of loan. The money from these mortgages can be used as the borrower sees fit, and they don’t need to make repayments until they move out of the home permanently. But these mortgages are available only to people aged 55 and over. |
Be Patient
Buying a house is one of the most significant financial leaps you’ll ever take. When looking for ways on how to save for a house in the UK, there’s one virtue you should practice above all else: patience.
Saving the amount of money you need for a down payment can take a long time because you need to have 5% to 10% saved for a mortgage deposit, and property prices in the UK have been soaring in recent years. You must be patient and not stress yourself out if matters are not going as planned. Keep track of your progress and be encouraged—even with the smallest rise in your savings.
Consult our tips for saving for a house, and when you manage to save the amount needed and reach the house-viewing stage, don’t forget to ask the most important questions for viewing a house.
DID YOU KNOW? London is the most expensive city in the UK for buying a property, with the average home price being £476,800. On the other hand, Liverpool is known for its affordability and is the cheapest city to buy a home, with the average price being £122,300. |
Conclusion
Saving up for a house needs to be methodically planned, as it’s a long and stressful process. Hopefully, the approaches listed in this article will prove effective and teach you how to save for a house as soon as possible. Try to implement these saving practices, and you should quickly see results in your savings account.