How To Save For Your First House
Saving for your first house, here in the UK at least, can often seem like a monumental and impossible task. With the UK housing market becoming more and more difficult to get into, a staggering 62% of under 35s receive help from “The Bank of Mum and Dad” to help them get on the property ladder! On top of this, many are turning to taking up side hustles to make extra money in a bid to reach their deposit goal.
The most frustrating part of saving to buy a home is the fact that if you were not renting, you could easily afford the mortgage repayments. The mortgage repayments are generally much less than what you might currently pay in rent but the deposits needed to buy your first house, are just out of reach. This is because a reasonable amount of your income is spent on rent. Not only is saving a deposit a huge obstacle but rising house prices mean that first time buyers, like yourselves, are often left feeling helpless and left behind.
So what realistic options are there to help you save for your first house? We are going to explore some of the tactics and products to do just that, without relying on “The Bank of Mum and Dad”. N.B. We are not going to advocate you stop eating avocado on toast like certain baby boomers! (It’s not like they had 100%+ mortgages or anything back when they were buying!)
Save First Then Spend
This tip is the most important one! Too many people save in the following way:
Get paid > Pay rent > Pay bills > Go through the month > Save what is left
If you follow this methodology you will struggle to save anything because you adjust your spending as your income changes. This means that we have the amazing ability to always end up with roughly £0 at the end of the month, regardless of what income we have. Instead, try saving a reasonable amount at the beginning of the month.
Get paid > Pay rent > Save a manageable amount > Pay bills > Go through the month
Once you have worked out a reasonable amount to set aside each month then you know how much you have got left to spend until the next payday. Putting money away to save at the beginning of the month means it’s a lot easier to save for that deposit.
Help-to- Buy ISA
I am not going to say much about Help-to- Buy (H2B) it is the first product many people will look at when starting out on buying their first house. We won’t discuss if it’s a good governmental policy or not, but you should be aware of a few things.
- You can invest up to £1200 when you first open a Help-To- Buy ISA.
- You can only save up to £200 a month after this.
- You only get the 25% bonus AFTER you complete on your first house so don’t expect to put the bonus towards the actual deposit. You can however use it for some furniture or anything else you need for your new home.
As you can see there are a few caveats of H2B ISA’s and you are rather limited if you are able to save more than £200 per month. Which leads us onto a product you may be less familiar with but could really help boost your savings if you have more than £200 to put away.