September 27, 2020
Let's tell you if you can get a mortgage after a quick look at your circumstances
It's really easy to take that first step to getting a mortgage.Get Started
Saving for a house deposit is one of the biggest financial commitments you'll ever make. And when you get there, it'll give you one of the biggest senses of achievement you'll ever experience.
And what's the worst thing about saving a deposit?
People telling you that you're not doing enough to save for that mortgage deposit already.
But… it's bloody tough. Research from Nationwide revealed if you're a first-time buyer and you start saving that deposit right now, it'll take 8 YEARS to have enough for a typical 20% deposit.
So, any help is worth entertaining, right?
Because, quite frankly, 8 years is a timespan equal to 4 average phone contracts, conceiving, birthing and schooling a child to create and debug simple computer programmes, or the entire recording history of the Spice Girls* – twice.
If you're lucky, you'll have two options to get on the property ladder sooner. One, some help form the Bank of Mum and Dad. Two, and if you're unlucky, this will be your only option, save harder.
Ok, so here are 3 big ways you can really slash that 8 years down. And then after those 3 we'll offer you links to a whole host of other deposit saving tips from across the internet, but start with these 3 as, like I said, they'll make the biggest dent.
If you want to make your money work as hard as you do, interest rates are important. You can take money from a regular savings account and put them into a cash ISA to get a higher fixed rate, but you'll probably find the two Government initiatives designed to help first-time buyers are more suitable.
How big's the boost?
Big enough to be very worth the few minutes it takes to set up a Lifetime Isa.
Say you've currently squirreled away £4,000 in a savings account offering 1.5%. That's just £60 of free money a year – and some of that will be taxed.
If you put that money in a Lifetime ISA, you'll get a similar amount of actual annual interest, but the government will pay a huge 25% bonus when you withdraw the money to buy a home – that's £1,060 of free money.
You could also look at boosting your income.
Now, may not be the best time to demand a pay rise (but don't rule it out completely if you know you're worth more because British employees work an average of 469 extra unpaid hours a year within their primary employment) but more people than ever before are looking to supplement their income with a side project or side hustle.
Evaluate your skills, consider your passion and work out how much time you can devote to earning a second income. It can be quite substantial, with the average side hustle earning you £6,604 a year after tax.
By the way, the most common side hustles are business services or creative endeavours, if you're stuck for ideas.
Ideally, especially if you already have a full-time job, you'll want to avoid a side hustle that directly swaps your time for your money, but if you enjoy the activity enough, it may be worth it.
And if not, just take a look around you at your current possessions. Anything that you don't use that could go on eBay? Will save on the removal costs too when you do finally get those new house keys in your hand.
There's no doubt you budget already.
Of course, you're pretty close-fisted when it comes to spending, right? It's pretty much the only way most of us can afford to save.
But what I told you it could be a bit easier?
Rather than just looking for the light at the end of the tunnel, shine yourself some light on the end of the tunnel and start budgeting with an end date in mind.
Look at what you've already saved over the past 6 months (or what you intend to save if you've only just started). Now take your final deposit amount (minus your current savings) and divide that by the amount you're saving. That'll tell you how long it'll be before you're buying a property.
For example: You're currently saving £350 a month. You have £2,000 saved up, but need £10,000. That's 8,000 / 350 = another 23 months or almost 2 years.
Now, knowing that, are you a bit more focused?
If the time remaining seems bearable, good. Hopefully, you'll have the motivation needed for the final push. If the time seems like forever, do we need to reassess the budget? If you want to be ringing up the estate agent with an offer in just 12 months, can you look to save another £300 a month?
It's essential to set monthly budgets as regular saving is far more effective than tricking yourself into thinking you'll make bigger one-off sums every now and then, but be sure to be realistic about how much you can afford.
Don't cut out the need for disposable income all together. You just need to be firm in the mindset that you need to save a set amount each month. If you want something that costs more than your monthly disposable income, then save it for a few months. Saving your disposable income as well as your actual deposit savings is also a good way to ensure that any unexpected costs, don't hit the deposit fund too hard too.
Perhaps the most rewarding part of reassessing your budget is to check regular outgoings and see if you can find a better deal. If you can cut your utility bills and credit card payments down by 50 quid a month, how much quicker will you own a home?
Ok, a strong grasp on your finances and regular savings will get you the deposit over time, but if you want to really speed things up you need to look at your biggest outgoing: housing.
This may mean a real change to your lifestyle.
However, you'll be sacrificing something you don't want, your current living arrangements, for something you want more than anything, your dream first home.
Chances are you're probably currently renting. Research shows renters stay in a property for 4.3 years and spend around 30% of their monthly income just paying rent. Now, imagine how quickly you'd get your deposit without paying so much rent.
Obviously, you'll always need somewhere to live, but if you can face living without your own space for 6 to 12 months, you may want to think about it.
This may seem a little student-y, but remember you're trying to graduate to become a homeowner. The fact is a room is smaller than a house, but so is the rent.
Probably the first people to ask are your friends and if not there are lots of sites that specialise in matching you up to new housemates, such as Spareroom.co.uk. If you live in a big city, chances are you'll find a new place in a few weeks and you'll start making immediate savings.
If you know your renting years are temporary, but can't quite bring yourself to not have your own place, consider downsizing your rental property.
Make a (small) list of essentials of what your new property needs and then get looking. If you currently live close to work, but in an area with high rents, ask yourself if you can save money by moving further away after you've factored in the higher commuting costs.
Also, because you've downsized, chances are you'll also save money on the rest of your housing costs such as utilities and council tax.
Not everyone's parents can afford to contribute to a deposit, but most of them will be willing to offer you the spare room – if they know it's only for a fixed amount of time. If you currently pay £1,000 a month, that's £6,000 in the deposit fund. Even if you need to pay them a bit of rent or contribute to bills, the savings will still be huge.
Want further mortgage deposit saving tips? Here you go. Remember, these are broader tips for those people who are really at the start of their house buying dream.
Here's a few other articles you may find useful.
Want to see what skeletons are in the financial closet? It's pretty easy to do and can be the difference to getting a mortgage or not.
It's a big question, isn't it! Fortunately Mojo is exactly the right place to find the answer. See what matters here and be ready to see your rates in minutes.