It isn’t always easy to save money for a mortgage deposit. With many lenders requiring higher sums from people interested in buying a house – along with overall property prices going up in the UK – you need to know how to save money effectively.
There are lots of methods that will help you to save money for a mortgage. If you are disciplined with the amount that you set aside and pay attention to the ‘smaller’ details that add up over the duration of a month, your ideal deposit figure is attainable.
Keep reading for some top tips on how you can save money for a mortgage deposit.
Setup a Standing Order at the start of each month
It can often be tempting to spend an extra bit of cash on new clothes, food that looks particularly tasty, or a night out with your friends, as the month goes by. This means that, if you wait until the end of a month to transfer money into your savings account, you may not have any money left.
By setting up a standing order that transfers money into your savings account at the beginning of each month (in other words, immediately after you receive your payment from work), it enables you to budget more successfully and be disciplined at saving the same amount each month.
Avoid an Easy Access Savings Account
Even if you have a dedicated Savings Account, it can be tempting to dip into it and transfer money back to your current account when you are short of funds.
If you choose a Savings Account that has a minimum notice period before you can take out money – for example, 90 days – then it prevents you from dipping into your savings pot to fund unnecessary purchases.
Savings Accounts with longer notice periods also tend to have higher interest rates, making this option a win-win.
Consider your spending
If you are serious about saving money for a mortgage deposit, then it may be time to consider reviewing your spending habits. By using budget supermarkets such as Aldi or Lidl, or cutting out ‘unnecessary’ purchases like new clothes or jewellery, you can significantly increase the amount that you save over the course of a month or year.
It may help to print out your bank statements from recent months and look for areas where you can cut down on your spending. For example, you might discover standing orders or direct debits that you’ve forgotten about, which could be cancelled.
Get a second job
Finding a second job to increase your income is a temporary solution that some people opt for when trying to save money for a mortgage deposit. Popular second jobs that can fit around a full-time career include being a delivery driver, an uber driver, or working zero hour contracts in a kitchen.
While some of these jobs may not seem glamorous, they can help to increase your income, and therefore enable you to save more money. It doesn’t have to be a permanent career move, as once you reach your target amount, you can always quit your second job.
Move back in with your parents
Sometimes, people struggle to save money for a mortgage deposit because most of their money goes towards paying rent. In this instance, you may want to consider moving back in with your parents (for the short-term) to reduce your outgoings.
While your parents will probably want you to pay rent while living with them, it is likely to be a lower figure than you are currently paying by living in your own place. This route can therefore help you to save money in the short term, until you have the deposit you need. Keep in mind that while it is sometimes possible to get a mortgage without a deposit, this is extremely difficult.
Sell things that you no longer require
Over the years, the number of belongings that you no longer need can slowly mount up. Clothes and shoes that you don’t wear, furniture that is hidden at the back of the garage, or even toys that another family might love to inherit, are all items that can be sold for extra cash.
Online sites like Facebook Marketplace, Depop or Ebay are ideal for finding suitable buyers – and the funds from your sales can go into your savings account for a deposit.
Team up with someone else
When you team up with someone else, such as a friend or family member, it can bring you several advantages.
Firstly, you and your friend can hold yourself accountable regarding your spending habits. If either of you sees the other one using money unnecessarily, you can keep each other on-track.
Teaming up with someone else can also make a mortgage deposit much more affordable. If you agree to buy a place together, then pooling your money can greatly increase the deposit that you can put down on a house. Your combined salaries will also improve the amount that a mortgage lender permits you to borrow.
Find a lodger for your existing place
Some landlords allow you to sublet the place you at staying in, as long as you follow their rules, and it doesn’t affect your ability to pay rent. Once you have permission, you may wish to rent a spare room out to a lodger to make extra cash.
While in the short-term, you could be reluctant to share your space with someone else, it will help you to raise a larger deposit in the long-term, and therefore make your dream of putting down a mortgage deposit far more achievable.
Move into a house share
Instead of bringing someone into your rented property, you could also move into someone else’s. This would ideally have the same effect as the above solution – saving you money on bills and rent, since you are sharing these fees with another person.
Be realistic about your price range
Everyone dreams of moving into a large, beautiful house in their early 20s. Unfortunately, this isn’t always achievable. So, in addition to all the money-saving strategies outlined above, you should also speak to a mortgage advisor, consider your salary, and decide on a price bracket that you can realistically aim for.
To have a mortgage accepted, not only will you need a sizeable deposit, but you will also need a large enough salary that the lender approves you borrowing the remaining amount. All of these factors should be kept in mind alongside your saving efforts. We Buy Any Home is one of the UK’s largest cash house buyers. We will make a fair offer on any property, while considering factors such as average mortgage interest rates in the UK. Contact us today for a free, no-obligation valuation.