Buying a house is probably one of the biggest milestones you’ll reach in life. For some of us, buying a house seems like a pipe-dream. Sadly, it’s expensive and requires saving up a lot of money before you can even dream of holding the keys to your first home. But don’t fret! I’m here to let you in on a little secret. As you know, I’m currently buying my first house and I want to help you do the same! So, let’s talk all about saving for your first home.
BEFORE YOU START SAVING
Before you start saving for you first home, it’s a good idea to set yourself a goal. Your goal should be how much money you want to save (minimum) and a realistic time frame for when you’d like to achieve that number. Having a rough idea of how much you want to save will help you to stay on track. Once you know your target, you can then break it down into smaller monthly chunks. For instance, let’s say you wanted to save £10,000 in 3 years time. If you broke that down into monthly amounts, in order to reach your goal you’d have to save approximately £278 every month. Remember, these days you can buy a house with as little as a 5% deposit and there are a few home-buying schemes out there to help first-time buyers get on the property ladder!
Obviously how much you need to save will depend entirely upon your circumstances! For some people, £10,000 will be enough money to get a deposit and have a little left over for other expenses. But for others, £10,000 sadly wouldn’t even cover the cost of a deposit. Yikes for expensive house prices! So have a little play around with the numbers until you find something you’re happy with. It may take longer than 3 years to reach your goal or you may be able to do it in less. It’s totally fine if it takes you longer than you were expecting…just focus on the end goal! You’ll have your own house and all that saving will be worth it.
CHOOSING A SAVINGS ACCOUNT
Okay, now that you know how much you need to save, it’s time to think about where you’re going to stash all that cash! Before I started saving my house, I researched what savings accounts were currently on the market to make sure I was opening the best account available at that time. When choosing my savings account, there were various factors that I wanted to consider. These included some of the following questions: how much money could I save each month; how much interest would I earn; can I withdraw money if I need to and can I make multiple deposits?
After a few days scouring the market and researching the accounts of interest, I finally made my choice. I opted for an easy-access ISA, which allowed me to deposit as much money as I wanted, had a great interest rate and didn’t have any repercussions for making early withdrawals. Thankfully, I didn’t make any withdrawals from my account but it was nice having that security in case I ever needed to.
CONSIDER A HELP-TO-BUY ISA
As I mentioned earlier, there are sooo many options out there today to help first time buyers get on the property ladder. One of those options is a help-to-buy ISA. Basically, with a help-to-buy ISA, for every £200 you save the Government will give you an extra £50. So, you could end up gaining an extra £3,000 thanks to this Government scheme. A bonus point is if your buying your house with a partner and you’re both first time buyers, you can BOTH open a help-to-buy ISA. Yay! That means together you could gain an extra £6,000 max.
The reason I decided against opening a help-to-buy ISA was because I wanted to be able save more than £200 a month. Help-to-buy ISAs cap your monthly deposits at £200 so for me this seemed counterproductive. I turned down the ‘free money‘ on the premise that I knew I could save up even more money on my own.
However, a couple of months ago I learnt that some providers, such as Nationwide, will allow you to open a secondary ISA account alongside your help-to-buy ISA. Although, it’s good to bear in mind that this is classed as a ‘split ISA’ so your interest rate will be considerably reduced. Regardless, I wish I had known this earlier as I definitely would have opened a help-to-buy ISA had I known you could do this.
There are a lot more conditions to consider when looking into help-to-buy ISAs, so I fully recommend giving this quick Money Saving Expert guide a read. FYI, the Money Saving Expert website and Martin Lewis will quickly become your holy grail…you’ve been warned!
OTHER SCHEMES TO HELP YOU MOVE
You don’t have to limit yourself to just the help-to-buy ISA as there are other schemes out to help you get onto the property ladder. You could also look into Shared Ownership or the new Lifetime ISA scheme, which I personally haven’t looked into (!), so it’s worth doing your research! If you think you may struggle making it on your own, do you research and find a scheme that works best for you. After all, you may as well make the most of the services out there!
SLASH UNNECESSARY SPENDING
Okay, this is probably a no-brainer. But it’s one of those things that’s worth mentioning anyway. Making minor changes to your spending habits can have wonderful effects on your saving. Take a look at your recent spending habits and look for ways you can cut back on spending. All those little cut-backs will help you get into your first home sooner.
Maybe you’re an avid coffee drinker, loyal to your early AM Starbucks every day? But, if you switched your daily Starbucks to a sachet of Nescafe coffee (mmm hello toffee nut lattes) you could get 8-days worth of tasty coffee for cheaper than the cost of 1 Starbucks. It’s a switch worth making! Think about other ways you can make slight adjustments to better your savings. You could also swap your weekly take-away for a fake-away and replace nights out with nights in! Think of ways to cut back on spending without cutting back on the fun.
Some of the changed I made included swapping my Starbucks for instant sachets, stopping buying magazines, unsubscribing from monthly beauty boxes and thinking more consciously about my monthly food shop. Obviously, that isn’t all I did to help my savings but it gives you an idea. Reducing these things meant I could save a tiny bit more each month. They aren’t lying when they say pennies make pounds.
MAKE MORE MONEY
Easier said than done, right? Hear me out on this one. Obviously you can’t just click your fingers and make an extra £20,000 a year. But you could look into ways to increase your monthly income. It could be by having a clear-out and selling old clothes, doing some freelance work, getting a second job or working overtime. Maybe you could pursue that creative side-project and earn a few extras pennies each month? Be brave and offer your creative services and you may be surprised to find that you can earn some extra money!
Be realistic and do what you can personally manage. Don’t burn yourself out by overworking but picking up an extra shift here and there could help! If you can get a second job, it’ll be a few extra pennies in the bank each month. The extra workload and hard slog will be worthwhile when you’re living in your own home! But here, I really want to stress that it’s important to not overdo things. Work hard but look after yourself too. I didn’t get an extra job or start freelancing but I understand that for some people it’s a path that can help them fulfill their home-owning dreams.
Saving money doesn’t have to be a chore. I won’t lie and tell you it will be plain-sailing every month but it needn’t be super stressful either. Just do your research, look at your finances and make sensible, realistic decisions to make sure you’re on track to reaching your goals. Buying your first home is a huge life decision so make the most of it! Work damn hard but also enjoy those moments leading up to the day you have the keys to your own first home.
There are obviously sooo many more tip and tricks for saving for your first home. But hopefully, this will be a good starting point to get you thinking about saving for your own home-buying journey. Let me know what your top saving tips are too!