When renting a house, you are unlikely to be left with much to save towards a deposit for your new home. In order to save more of your money to put towards a deposit, you may have to sacrifice some of your own space for a short while. There are a few options that you could consider when trying to reduce the amount that you are spending on rent, here are some:
- Returning home.
If you have the chance to live with your family for a short while, this will be a lot cheaper than what you would pay whilst renting your own home. This will give you the ability to increase the amount you are saving quite drastically. If your family and you get along well and they have enough space for you to live in their home, this is definitely worth discussion with them. Before you do move you could discuss how long you plan to stay, rent payments and any house chores you might take on in return for living in the family home.
- Finding a cheaper room.
You may have friends that have a room available to let, living with them for a short while is likely to benefit you in terms of paying a smaller rent and being able to save more towards a mortgage deposit. If you don’t have any friends to live with, you can explore the web and find a cheap room to rent with other people. There are many platforms on the web that offer this service.
- Get a lodger.
If you have space within your home, you could reduce your rent costs by taking a lodger in. This will again give you extra money to save towards a deposit. (Before searching for a new flatmate, you will need to ensure that your landlord is happy for you to sub-let your room). The best way to find a lodger is by asking friends, family or your partner to move in or search online throughout the web.
Get help with your deposit
There are ways that you can get some help with your deposit, which will make buying your property more realistic. Here are a few ways that you could do this:
- Government schemes.
There may be opportunities for you to take advantage of the governments ‘affordable housing’ schemes, so that you can get your food onto the property ladder.
- First buy.
First buy is a government backed schemes that will loan first time buyers of homes up to 20% of the price of a new home. You would only need to get a 5% deposit before you could buy. First buy loans are usually only available are on new build properties, they are only repayable when you sell your home.
- Help to buy.
The Help to Buy government scheme, is offered by lenders in England on new and existing properties. The scheme will offer mortgages for buyers with only a 5-10% deposit. The Help to Buy ISA is also available; this will help you save up a deposit for your first home.
Borrow from the bank of mum and dad.
If you have parents that are willing and able to borrow money to you for a deposit for your home, you may be able to move in months or years earlier than you may have been able to do without them. Sitting down with your parents and discussing how you will pay this money back will be important. Try not to overstretch your budget though, this is because you and your parents may lose out. If your parents are willing to do this, they can read this guide on how they could help you. This includes cash gifts, loans, equity release and more.
Find a guarantor.
Borrowing from your parents may come as an unfeasible option. However, there are also a number of mortgages that allow parents (or others that are willing to do so) to help you buy your first property without having to give you a lump sum of cash. Asking somebody to be your guarantor is a big ask, this is because it will involve the guarantor using their home as security for your mortgage or putting their savings in an account that is associated with your mortgage.
Buy part of a property.
If finding money for a deposit is proving difficult for you and holding you back from purchasing a property, a shared ownership may be a more affordable option for you. A shared ownership and shared equity scheme is where you will purchase part of a property and rent the rest. Although you would not own 100% of your home straight away, you will have one foot placed firmly on the property ladder. A deposit will still be needed to get a mortgage for a part buy property. Although, you will only need to borrow 25%, 50% or 75% of the property value so the amount you will need to save will be much smaller.
If you take your time to set out clearly your earnings and the cost of your regular outgoings, this could definitely help you to find the areas where you could cut back on and save more money towards your mortgage deposit. Be sensible in your estimations so that you are able to keep a healthy budget. Another tip is to remember to keep an amount of leeway to cover any unexpected costs that may occur e.g. car repairs. Additionally, try to make sure you’re not paying more than needed for your bills such as phone bills, utility bills and various insurances.
Make your savings work harder.
The savings for a deposit could be a lot easier if your savings account can help you out, a good rate of interest could be very beneficial in helping you reach your goal of savings faster. Picking the best account will depend on how you plan to save. If you want to set aside a regular amount each month, a regular savings account could be the best option; equally, if you need greater flexibility, you might need to plump for an instant access savings account.
You can also benefit from paying less tax on your savings by maximising your full ISA allowance each year. Check out our ISA guide to find out how easy it is to set one up.
Chances are, you would pay a whole lot more on your mortgage and debt interest than you can generate in savings interest, even if you transfer to the best rate available.
If you have worked out your money will be better off being used to pay off your mortgage think carefully how much of your savings, you should use. You will have plenty of outgoings when you move so do not leave yourself short.