How to Save for a Deposit While you are Renting
Although mortgage availability has improved in recent years, one of the major challenges facing homebuyers is still saving the deposit you need to get a mortgage. This problem has been exacerbated by the fact that rents in many areas have risen sharply, putting pressure on disposable incomes and making it even harder for people to save money.
The good news is that there are still steps you can take to make saving a deposit easier.
These can broadly be divided into three categories:
- Money saving tips
- Reducing the amount that you need to pay upfront
- Reducing what you spend on rent while you save
Over the next couple of weeks we’ll be looking at each in turn – starting today with money saving tips – to help make your journey onto the property ladder easier.
Money Saving Tips
Set a Monthly Budget
When you’re trying to save money, spending an evening planning out a budget for all your earnings and outgoings is essential. When you’re doing this, it’s really important to be realistic about how much you will be able to limit your spending. It’s easy to write off things like clothes and cosmetics as irregular or ‘one-off’ expenses but the reality is that these things do come up and need to be accounted for. Similarly, you should be realistic about how much you will spend on social outings as people invariably underestimate this.
You can take the opportunity when you’re going through your budget to see if there are areas where you could potentially cut back a little. It can quite often be eye-opening to realise just how much is going out of your account each month in the form of direct debits and many of us are paying for things like gym memberships or premium TV packages that we rarely use or don’t get full value from.
Making Your Savings Work for You
While you’re saving for a deposit, there are a number of options to make your savings grow more quickly. For first-time buyers the Help to Buy ISA is perhaps the most significant. It allows you to save up to £200pm with the Government boosting your savings by 25%. You can find out more about the scheme and whether you are eligible here.
If you are not a first-time buyer you can still look at other vehicles like a cash ISA or stocks and shares ISA. It can also be worth looking into whether you are getting the best possible deal from your main savings account. Many of us simply stick with the same bank we’ve been with since we were kids and even though interest rates are currently poor for savers, you may find that there are much better deals available than the one you are on.
Plan Your Weekly Shopping in Advance
One way that you can make a substantial reduction in your budget is to plan out your weekly shopping in advance. Set a budget for how much you are willing to spend on groceries then stick to it by planning out what you are going to eat each day in the coming week. If you live alone, making two or three portions of some meals and freezing some for a later date can reduce how much you are spending on meals.
One of the easiest things many of us can do to reduce what we spend on food is to simply take our lunch to work rather than buy it. Even spending three or four pounds a day on a ‘meal deal’ from the local supermarket soon adds up when you compare it to the cost ofmaking a salad or sandwich.
Reduce Your Utility Bills
In the same way that most of us never think to change our bank account, a lot of people simply stick with whichever gas or electricity provider they are with regardless of whether there are cheaper options out there. Websites like uSwitch and Money Supermarket allow you to compare rates for everything from broadband to car insurance.
Your mobile phone contract can be one of the easiest ways to drastically reduce outgoings. When your contract comes to an end, have a serious think about whether it’s worth paying a high tariff to get the very latest model, or whether your current phone actually does everything that you need it to. If it does, a SIM only contract may make sense for you.
Remember, Little Things All Add Up
When you’re thinking about saving for a deposit that could well stretch into five figures it can be easy to think that making small changes isn’t worthwhile. The reality is that all of these little changes do add up though and, while it may not be true for everyone, in most cases we could all manage to save a bit more if we spent the time shopping around for the best deals and were stricter with our spending.
If you are thinking of buying a property and need advice on anything from market conditions to planning your budgets, feel free to get in touch today on 0131 667 0232 and one of Warners friendly, experienced staff will be happy to help.< Back