When you think of buying a house, the first thing that comes into mind is the deposit- which is the sum of money towards the total property cost. A house deposit will enable you to get a mortgage, which acts as a loan for purchasing a home.
Before saving money for a house, you need to determine the following important points;
1. The Property Cost
The higher the house price, the more money you’re going to save. Property prices will vary according to type and location, among other things. Properties in the UK could be as low as £133,000 and as high as £950 000.
Knowing the price will help you set a goal and work towards it. You can check prices here at the loan registry website.
2. How Much Credit You’ll Need
A deposit is typically a percentage of the property’s cost. You’ll therefore need a mortgage to complete the price balance. For instance, if you save £40,000 for a £400,000 house, you will have a 10% deposit and need a 90% home loan or mortgage.
Many lenders offer mortgages of up to 95%. If you have a larger deposit, you will have smaller mortgage payments since you’ll take a smaller debt. You will also get lower interest for smaller mortgages.
3. Additional Costs
Buying a House comes with numerous extra costs in addition to deposit and mortgage. The additional costs include stamp duty, conveyance fees, and solicitor fees, among others. You, therefore, need to save for the costs.
How To Save For The House
Now that you can estimate the total amount you need to save for the deposit, it is time to take a bold step of saving and doing without some things. Scrutinize your financial situation to see how much you can save every month and the number of years you’ll need to reach the target.
The following tips should help you;
1. Reconsider Your Goals
2. Can You Save More Money?
i) Better Budgeting
You can save a little more money by changing your spending habits. Small changes like opting for a taxi rather than a bus or using cheaper brands can make a big difference after some time. A significant lifestyle change like renting in a relatively cheaper place can help you save big time.
Cut down on impulse shopping, and you’ll save hundreds of dollars every year. Perhaps it’s time to unsubscribe from those pretty marketing emails so that deals don’t tempt you into shopping for things you won’t even get to use. Cook your meals at home and gradually do away with takeouts as they’re costly.
A savings plan will help you save more and better in a disciplined manner.
ii) Extra Income
Think about different ways to increase your monthly earnings by finding a side job or getting a higher-paying job. You can take up freelancing gigs that could include photography, writing, or music, which you can do at your convenient time.
You can otherwise browse through job postings or compare your salary with other employees in your field of expertise. If you’re paid lower, you can request an increment or get a better-paying company.
Paying off debts while saving will always pull your plans back. If you’re paying off a loan or credit card with high-interest rates, you should consider finishing the loan repayment before you begin saving for a home.
iv) Skip Vacations
It’s amazing to explore new destinations but very expensive at the same time. You can skip several vacations and instead tour around your city. There are several staycation ideas that you probably have not been keen on. You could explore nearby historical sites, get a spa treatment at home or join a local art or cooking class.
V) Cost Sharing
Jointly buying a house with a relative or partner can help you reduce the deposit amount you need to save. Joint savings will mean a bigger deposit which can guarantee you a good mortgage. You should, however, consider the risks associated with sharing finances. Spell out how you want the shared ownership to be and a backup plan if you fall out.
Saving for a house requires consistency and a solid plan. You first need to determine the down payment cost and then work around your finances to get your target. Create a working budget and perhaps take a second job to complement your income.