How to Save for a House Deposit

The dream of owning your own home can sometimes feel out of reach before you’ve even started because of the first hurdle, the house deposit. Saving for a house deposit requires time and commitment, but with a well-defined plan and some smart financial strategies, you can turn that dream into a reality. Within this guide, we’ll take you step-by-step through the process of budgeting for a deposit, from setting realistic goals to maximising your savings potential.
Decide on your realistic goal
You can’t begin to save for a deposit without knowing a rough idea of how much money you are aiming to save! In our blog on mortgage deposits, we explain how placing a high deposit reduces your mortgage amount and could save you money on interest in the long run.
Property prices can vary by region or city, so ensure you have researched where you want to move to and the average cost of a home to determine your deposit goal. After deciding on the cost of houses, it’s time to see whether you want to save up for a deposit of 5%, 10%, or more. Although we’d all like to put the largest deposit down to lower the mortgage cost, it is important to be realistic in the goal you’re setting. The next step is to look at your current income and expenses for where you can potentially cut back.
Look at where costs can be cut
The main way to save more money is to cut down on your average outgoings. This might mean looking at renting cheaper accommodation for a short period, or seeing if friends or family will allow you to stay with them for a low cost.
To see where costs can be cut, it is beneficial to create a spreadsheet of your current expenditures. Separate your outgoings into different categories such as essential bills, food shopping, travel, leisure activities etc., to see where the biggest areas are that you’re spending money on and where you can cut back. Some bank providers even include this functionality within their apps, allowing you to see exactly which categories your money is being split between. Using this built-in function means you can compare month-on-month where you’re spending.
Be savvy with your spending
You may find that your current takeaway habits or weekends away are making a dent in your bank balance. Look at solutions that involve making smart financial choices but still mean you can enjoy life. For example, rather than takeaways, you could make it a mission to create the best budget-friendly ‘fakeaway’, and rather than trips away, look at low-cost days out near you such as hiking or free museums.
Have a proactive approach
Now is the time to look at your current outgoings and see if any changes can be made to bills you’ve been paying for years. We can all easily ignore phone contracts and gym membership costs when they are recurrent expenses, but a simple phone call or email to your service providers could lead to savings. Similarly, by exploring other options you might find you’re able to switch to a cheaper deal.
Create a savings plan
Once you’ve decided on your budget goals and looked at what your current expenses are, it’s time to generate a plan of action. The key here is to find a balance that is both achievable and allows you to make consistent progress. There is no point setting a huge goal that cannot possibly be reached, instead focus on specific and realistic targets.
Explore different banking options
Consistency is key when saving, so setting up a direct debit to a separate savings account can be a fantastic method of putting money aside and not dipping into it. If you already have a savings account, it’s possible you may not be enjoying the best interest rates on offer. Make sure to look around and compare all options for where to save your money for the best deals.
Government initiatives
It is also a good time to research any initiatives that can help, such as government-backed savings accounts like a Lifetime ISA (LISA). With this scheme, first-time home buyers can put up to £4,000 into their account per year, and once you’re ready to buy your home the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. Make sure to read the terms and conditions to see if you’re eligible.
Seek professional guidance
If your current financial situation is complex and you want more tailored assistance, contacting a financial advisor may be beneficial. A financial advisor can analyse your income, expenses and debts to identify areas for potential savings and create targets. Their knowledge of investment options, government schemes, and debt management, can all be invaluable for someone looking to save for a deposit.
Communication is key to getting your house key
If you’re buying a home with a partner, it’s especially important to talk about finances and make sure you’re on the same page about saving. Disagreements could stem from one partner saving more than the other, or making compromises to save money when the other party isn’t changing their current spending habits. You should come to a mutual agreement about where you’ll cut down spending, and how much you’ll each aim to save. You could both set up direct debits to a joint savings account to ensure you’re both sticking to your targets.
Homebuying help and advice
We hope this blog has equipped you with the tools you need to save for your house deposit. With persistence, consistency, and realistic goals, you’ll be able to achieve your dream of homeownership. For more help and advice along the homebuying journey, explore our blogs at County Town Homes.