Buying your own home is a massive milestone for many people, but it can feel quite overwhelming when you first start crunching the numbers and figuring out how to get there. Wherever you’re starting from, saving for a deposit requires time and patience, as well as a dedication to learning the skills associated with being more frugal and money-savvy.
To help break it down, we’re going to explore four top tips for first-time buyers saving for a house deposit.
Learn to budget
If you don’t have a clear picture of your current financial status, you cannot plan for a huge investment such as a house accurately. Take an in-depth look at your income, expenses and current savings and create a spreadsheet to input all of your data. Looking at each section in turn, consider how you can increase your incomings or decrease your outgoings to leave you with more to put away at the end of each month.
Creating a budget is something that’s relatively simple in principle, but it takes consistency and self-discipline to stick to. That’s not to say that you can’t leave any money spare for a night out or takeaway – it just means that you have to plan for these occasions and be conscious of how they’re impacting your overall saving goals.
If you have a good grasp on your finances but are still struggling to find much to save after your expenses, consider starting a side hustle. Whether it’s a second job, your own business, or taking on freelance work at the weekends, upping your income is a good way to ensure you reach your deposit goals faster.
Of course, you’ll want to resist the temptation to spend more just because you’re earning more – a good rule of thumb is to aim to save at least 20% of your income. Opening a separate savings account for your house fund is a good way to keep a clear picture of your progress.
Maximise your savings
There are many different ways to store your savings, from specific savings accounts with varying interest rates, to ISAs, and even accounts which invest portions of your money into stocks and shares. There are risks and benefits to each, so be sure to do your research to find a method that works for you and maximises your savings.
Starting early and making regular saving a habit is the best way to achieve your goals without stress, and having a long-term savings plan allows you to take advantage of longer, fixed-term accounts which offer better returns and interest rates.
Grow your credit score
Your credit score is an important factor when it comes to getting a good rate on your mortgage, so whilst saving for your deposit, you’ll want to ensure it’s as high as possible. Paying off all of your debt on time is essential to avoid black marks on your credit score, which can make lenders reluctant to offer you the best deals on a mortgage.
Having a credit card is helpful for building your score, but you need to be able to pay it back on time to avoid fees being added to your balance. Again, having a clear picture of your spending habits is key – work out where your money goes and keep a close eye on it.
Ultimately, with a little perseverance and consistency, saving for a house deposit is an achievable goal. By taking the time to learn to budget, manage your spending and save what you can afford little by little, you’ll be unlocking the door to your first home in no time.