All too often, when I was saving for a house I would see mainstream media releasing articles telling the story of a “millenial” who bought a house despite being on a low income. Filled with hope, I’d frantically click on the title expecting the article to answer all my burning questions. Instead, I’d wind up getting three paragraphs in only to find out that the home-buyer in question actually got a lump-sum of money from their parents… and with a heavy sigh, I’ll close the article and go back to the drawing board.
Sound familiar? Then you just might be in right place.
No shade to them, that’s great that they were able to buy a house with the help of their family but for so many other avid homebuyers, that’s not an option. And for people like me, those kinds of articles can leave you feeling somewhat deflated; as though you’re destined to live with your parents or in rented propety for the rest of eternity. But, that doesn’t have to be the case. You can channel those feelings into determination and use it to drive yourself to get on that property ladder… or at least, that’s what I did.
There was no way I was going to let the world tell me I couldn’t buy a house unless I had a cash injection from my family. I’m stubborn… and in moments like this, it’s a trait that I’m thankful for. So, that’s what I did. At the age of 23 years old, I bought a house all on my own whilst earning £18,000 and I’m damn proud of myself for doing so.
And that brings me to this moment and why I’m retelling my story and including some homebuying advice so hopefully you can do the same. I’ve tried to be as transparent as possible and I really do hope that this post helps at least one person to get on the property ladder, even when the world is telling them they never will.
DISCLAIMER: I understand that everyone’s cirmcumstances are different and with that, everyone will have their own privileges and challenges in their home-buying journey. Therefore, as I write this post, I plan to highlight my own privileges and challenges and I recognise that this post may not help everyone. However, I have tried to make this post as universally helpful as possible!
What mortgage can you get on an £18K salary?
When it comes to buying your first home, it’s worth noting that the mortgage you get will be dependant on your salary. To get a good idea of what mortgage you could get, you will want to multiply your current salary by 4. So, if you earn £18,000 per year, it is likely that you will be able to get approved on a mortgage of £72,000.
I’ll go into this in more detail below, but it’s a good idea to hold this in your mind. Now, I know that getting a house for £72,000 isn’t feasible for many places in the UK (thanks inflation…) but that isn’t to say you can’t buy a house. There are other options available, such as the shared ownership scheme, which can help you get on the property ladder.
Now, let’s breakdown some of the other fees you will want to consider before buying your first home.
Fees to Consider Before Buying a House
Before we even get into saving for a house, it’s important to take into consideration all of the other potential fees that you need to be aware of when buying a house. There’s a lot of things that may not have even crossed your mind until now!
Before I started saving to buy a house, I only ever though about saving for a deposit. I’d never actually stopped to think about what other fees might be involved before I can get my hands on the keys to my first ever property. The process of buying a house is a big commitment so it helps to understand exactly how much it’ll cost to buy your first house. After all, you really don’t want any nasty surprises.
As a first time buyer, you may need to save for a deposit that’s 5% – 25% of the property price. As a general rule, you’ll probably be looking at a deposit of 10%. Alongside your house deposit, there are other fees to take into consideration:
- Legal fees
- Legal fees tend to be between £500 – £1,000
- When buying my house, my legal fees were £480 and I had to pay £200 of this upfront to cover the cost of searches before my Solicitors started the work
- Valuation fees
- The valuation fee may depend on the property price. Usually, this fee will be between £100 – £2,000
- I opted for a Homebuyers Report and my valuation costed approximately £450
- Stamp duty (if the house is over £125,000)
- Mortgage application and admin fees
- Sometimes, there can be various fees surrounding your mortgage application including: Mortgage Broker fees, Mortgage account fees, Mortgage arrangement fees
- For me, I didn’t incur any mortgage fees. I chose a mortgage that did not include an upfront product cost and my Mortgage Broker fees were paid for by the lender
Please note, the above isn’t an exhaustative list but hopefully this should cover some of the most common fees that you are likely to incur when buying your first house. Some of the other fees not mentoned include: the cost of moving (if you plan to hire a removals company), furniture you’ll need to buy or renovation work you’ll need to undertake when you first move in.
(Approximate cost of fees + 10%) + approximate house deposit
So, before you start saving, it’s well worth researching the average price of the above fees for houses in the area, and price-bracket, that you’re looking at. Then, add 10% to that approximate cost and add that number on top of how much you need to save for a deposit. By doing this, you’ll reduce the risk of running into any unexpected costs.
Calculating Your Monthly Income and Expenditure
Before we dive into looking at all the different savings accounts and how to choose the right savings account, it’s important to understand how much money you actually have each month.
For some people, this will probably be the hardest part of starting your journey to buying a house. But take a deep breath, grab some paper and a pen and get ready to deeply analyse your monthly spending habits. When I got serious about wanting to save money for a house, I sat down with a cup of tea and started looking at my monthly finances. I noted down my income for each month, along with my committed expenditure (i.e. bills and all the not-so-fun things in life!) and other ad-hoc spends likely to happen throughout the month.
Make Note of Your Income
When I first started saving money, which admittedly was either a) to buy a house or b) to go travelling, I was only earning £15,000 pa. In this first year, whilst earning £15K, I was sporadically saving money and often dipped into my savings account. At the time I was 21 years old – I didn’t know if I wanted to buy a house or go traveling. So, I just started slowly saving money without worrying too much about saving a dedicated amount each month.
In my second year of saving, I finally set my heart on buying a house and started to take saving for a deposit seriously. During this time I was earning approx. £16,500. In fact, It was actually only in my last three months of saving that I actually started earning £18,000.
|Year||Approx. Annual Income|
|1st Year Saving||£15,000|
|2nd – 3rd Year Saving||£16,500|
|Final 3 Months Saving||£18,000|
Of course, working out your monthly income is the easy part. The hard part is working out your monthly expenses.
Calculate Your Monthly Expenses
For me, I was lucky to be living with my Mum at the time of saving for a house. However, I didn’t live there rent-free. My expenses included paying £250 – £300 per month towards bills, £150 for food (approx. £100 groceries and £50 eating out) and £100 for dog food. So, whilst living with my Mum did mean I didn’t have to worry about additional costs that come with renting, I was still responsible for contributing for my share of the bills.
Once you have worked out your committed spending, such as household bills and car insurance, you also need to work out the smaller monthly bills. This can include direct debit payments like your phone bill and gym membership but will also include the variable outgoings such as shopping, petrol, personal care, entertainment (hello Netflix and Spotify subscriptions!) and any other misc spends that you are aware of.
Finally, once you’ve jotted down every possible income or expenditure, you can work out how much money you have left at the end of the month. From this money leftover, you can decide how much you are willing to set aside each month to save for a house. It’s also worth going back over your monthly expenses and seeing if there’s any cutbacks you can make e.g. can you get a cheaper phone contract? Are there any subscriptions you can cancel? Could you make smart food-swaps to reduce your monthly food expenses?
One thing I would advise is that you don’t squirrel every last penny of your money into saving for a house. You never know what emergencies may crop up so it’s always a good idea to try and keep a little bit of money to help cover any last minute, unexpected emergencies. Plus, you don’t want to completely remove all luxuries or treats from yourself. By doing that, you’ll be much more likely to fail at saving money. Instead, still allow yourself treats each month… just be conscious about how much money you spend on these and try to scale them back compared to what you would usually spend.
Helpful Saving Tools and Tips
I painstakingly worked all of my finances out by hand but thankfully, you don’t have to do it that way. Rhianna Olivia created an incredible budgeting spreadsheet that you can use to help track your monthly expenses. It can help make the whole ordeal slightly less daunting.
Another useful tool for tracking your monthly spending habits is to use the Emma app. I recently discovered the Emma app and I’m seriously impressed by it. It allows you to connect all of your bank accounts and savings account to it so you can easily see all your accounts in one place. You can then easily view your monthly spending habits as they are broken down by category.
You can also use the Emma app in conjunction with your budgeting spreadsheet by setting budgets for each of the categories to stop you from spending over your monthly allowance. Finally, the Emma app offers weekly reports and in general, helps you track your money in a nice, visual format.
Savings Account Options
Now that you know how much money you have available to save, it’s time to choose a suitable savings account. There are lots of options out there when it comes to saving money, but the ones we’re going to look at today are Help To Buy ISAs and Cash ISAs… simply because, there are the two I considered when buying a house and that, I believe, are most talked about when buying your first home.
Help to Buy ISA
The Help to Buy ISA is a goverment-backed savings account. There are many benefits to opening a help to buy ISA however it is worth noting that after 22nd November 2019 the Help to Buy ISA will no longer be available to open. If you open an account before this date, you’ll still be able to use your account (and cash in on the benefits) long after this closing date for new accounts so don’t worry!
With a Help to Buy ISA, the government will boost your savings by 25%, meaning it’s a great way to up your savings if you are struggling to save. For every £200 you deposit, the Government will contribute an additional £50 up to a total contribution amount of £3,000. Based on the £50 per £200 contribution, you would need to save £12,000 to claim the total Goverment contribution. So, using the Help to Buy ISA essentially means you have the potential to claim £3,000 free money.
An extra bonus on top of that is if you are buying with a partner who is also a first time buyer, then you can both open Help to Buy ISAs, meaning you could collectively claim up to £6,000 in Government contributions. It’s a great way to boost your savings.
However, when buying my house, I decided against using the Help to Buy ISA. My main reason for this was that you can only save £200 per month with the Help to Buy ISA and I knew that I would want to save more than this each month. I believe some banks/building societies will let you open a Help to Buy ISA alongside another ISA account… however, don’t quote me on this! This is simply advice I was given by a finance advisor at one of the banks I visited at the time of investigating different ISAs before I started saving to buy a house.
You can put down an initial deposit of £1,200 so, if you are happy saving £200 or less per month and have an initial lump-sum to deposit, it’s well worth considering. It totally depends on what works best for you and your circumstances! My partner is using a Help to Buy ISA, which he will be able to benefit from when we look to buy a house together.
Instead of opening a Help to Buy ISA, I opted for a Cash ISA. To find the most suitable Cash ISA (and the one with the best interest rate), I used an online comparison tool to compare the interest rates and terms of different ISAs.
Some Cash ISAs will let you make several withdrawals a year, however others may reduce your interest rate each time you make a withdrawal, or limit the number of withdrawals that you are allowed to make. Obviously, when saving for a house, you want to try not to dip into your savings but sometimes, life happens. There are going to be things that are out of your control and there may be occasions where you need to use your savings. So, it’s worth looking at the terms of each Cash ISA so you understand if you’ll be reprimanded or not for withdrawing money.
The benefit of opening a Cash ISA is that you have control over how much you deposit each month. Whether that happens to be £50 a month or £500 a month, it’s completely up to you. I found that I saved an average of £300 per month. However, some months I’d saved absolutely nothing and other times, I’d get to the end of the month and find that I have an extra £100 or so that I can deposit into my savings account.
As per the standard ISA rules, the amount you can save per year is capped at £20,000 and the money you save is tax-free. However, a downfall to ISAs is that the interest rate is low, so you might be able to get a higher interest rate if you opted for a different kind of savings account.
Other types of savings accounts
There’s an array of different savings accounts available to make use of. These include, but likely aren’t limited to:
- Stock and Shares ISA
- Lifetime ISA
- Innovative Finance ISA
- Regular savings accounts
- Fixed-rated Bonds
- Easy Access Savings Acounts
- and more…
So, before choosing a savings method, it’s best looking at your spending/saving habits and working out which savings account is most suited to your needs!
Average House Prices
Do you know the average house price for where you live? Before you start saving for a house, it helps to have a target savings amount in mind. Having this goal to strive towards will help keep you on track with your savings by giving you something to aim for. Your target amount should be based on how much you need for a deposit, other fees involved in buying a house and money needed for renovations/purchases once you’ve moved in.
To help calculate how much you need to save, have a look on house buying platforms such as RightMove to get an idea of what properties are currently going for in your area.
To give you a brief overview, I found this table from research conducted in December 2018 which gives a quick overview of the average house price for First Time Buyers in different regions in England, Wales and Scotland:
|Region|| Average House Price |
for First Time Buyers
Obviously, the above table is subject to change and doesn’t take into consideration number of bedrooms or other property requirements you may have but it does give you a good indication of how much you may need to save in order to buy your first house. For instance, I live in the North West, where the average house price for FTB is calculated at £138,288. However, my first house cost less than £80,000.
Of course, compared to people buying down South and in London, my house was extremely cheap which allowed me to buy a house after 3 years of saving and meant I only needed to save £8,000 to secure a 10% deposit. But, don’t be disheartened. If the average house price where you lives look to be out of your reach, there are other options available.
Erica at Being Erica wrote an amazing blog post all about Shared Ownership. In her post, Erica detailed how you bought her first home in London using the Shared Ownership scheme and states that you only need £4,000 to buy a property in London. Thanks to schemes like Shared Ownership and Affordable Housing, there are soooo many more options available to help First Time Buyers looking to get on the property ladder.
Calculate How Much You Can Save
Now you know the average house prices where you live and have an idea how much you need to save, let’s work out how much you can save and how long it might take you to get there.
When buying a house, it’s good practice to have a 10% deposit as your baseline requirement. Only a small number of lenders will give you a 5% deposit so using 10% as your baseline will give you access to a wider choice of mortgage lenders.
Another thing I want to highlight is not to take Mortgage Calculators for how much you can borrow too literally. Mortage Calculators tend to be based on 4x your salary and will also try to take into consideration estimated expenditure. When I was earning less than £18,000 and looking to buy a house, mortgage calculators told me I would only be able to buy a house that was £50,000 – 60,000. Obviously, I managed to buy a house for more than this so I would take Mortgage Calculator results for how much you can borrow with a pinch of salt. It’s much better to speak with a financial advisor and get a Mortgage in Principal.
Now that you know the average price of the house you want (cost) and that deposit amount you need (10%) you can work out how much you need to save:
10% of Cost + additional costs= £ Need To Save
So, if you are looking to buy a house that’s £150,000 with a 10 per cent deposit, the amount you need to save will be £15,000.
Remember, this doesn’t take into consideration additional fees so scroll back up to the additional fees seciton and make sure you’ve worked out how much extra you might need to save on top of your deposit amount to cover all other fees and expenses.
Now you know how much you need to save, you can then work out how long it’ll take you to reach this target amount. Saving money is all well and good but without a clear plan, goal or timeframe, you might find yourself going off track and losing sight of your savings goals. That’s why number-crunching is your friend. By breaking the cost down into small amounts or small monthly goals, it will seem more achievable.
Working out a timeframe for how long it’ll take you to save money will also allow you have a realistic outlook on your house-buying journey. If you can only afford to save £100 a month, it’d be unrealistic to think you can afford to buy a £150,000 house in less than a year. The truth is, the more expensive the house is, the longer it’s going to take you to save and that’s okay.
You can work out how long it will take you to save up for your house deposit by dividing how much you need to save by how much you can save per month:
£ Need To Save / £ Can Save per Month = Time Taken to Save (in months)
Using the £150,000 house price as an example, if you are able to save £300 per month it would take you 50 months (4.16 years) to save £15,000. This calculation gives you a realistic idea of how long you may need to save for before buying a house. Of course, like anything, it totally depends on your own financial situation.
If you aren’t happy with the results you get from the above calculation, there may be a few questions you need to consider:
- Can you save more money each month? e.g. cut out ‘unnecessary subscriptions’, reduce eating out budget, research cheaper bill tariffs…
- Can you increase your income? e.g. get a second job, start freelance work, speak to your boss about a pay rise…
- Can you buy a cheaper house? e.g. look for a house with less bedrooms, in a different area, on an Affordable Housing scheme…
I know the above questions are pretty big asks and it might seem like I’m asking the obvious but asking these kinds of questions helps you to stay in check. By being practical and realistic about your financial position and what small changes you might be able to change can help improve your chances of buying a house in a time frame that you’re happy with.
As mentioned earlier, schemes like Help to Buy or Shared Ownership are great ways to improve your likelihood of buying a house as a First Time Buyer. So, if you think you may struggle buying a house on your own, then look at alternative routes and schemes that might be able to help you on your journey.
Don’t Compare Your Home Buying Journey to Anyone Elses
Last but not the least, I think the most important thing to note is that you really shouldn’t compare your home-buying journey to anyone elses. If there’s one thing I’ve learnt from all my research into being a first time buyer, it’s that everyone’s circumstances are different. Whilst it may take your friend 3 years to buy a house, that doesn’t mean it’ll be the same for you. That doesn’t make your journey any less of an achievement!
You need to be realistic about saving for a house and don’t be too hard on yourself if it takes longer than you initially thought. Setbacks are natural and you’ve got to make sure you still let yourself enjoy life. Squirreling away every last penny towards a house will only make things harder. Let yourself enjoy little luxuries or heck, big luxuries.
As long as you’re still working towards your end-goal of owning a house and don’t fall off track, there’s no problem with taking a month here or there to treat yourself. Whilst I was buying a house, I still made sure I set money and time aside to travel because it’s something that I felt was important to me and my happiness at the time. This meant that during my homebuying journey, I didn’t save a single penny some months but it also meant I got to go on 4 budget-friendly holidays including a solo trip to Belgium. Sure, if I hadn’t taken those trips, I would have been able to move sooner or I might have been able to save more for a nicer house. But hey, I’m still happy with the decisions I made and I’ve got a comfortable little 2-bedroom house to call my own.
I guess, the long story short is you can buy a house when only learning a small wage. Just do your research, take baby steps and don’t put too much pressure on yourself along the way.
Good luck and let me know how you get on!