How to save for a home to buy when renting

If you’re currently renting but would like to buy your own home in the next few years, the first thing to do is find out how much you need to save. And you might be pleasantly surprised, because it’s often not nearly as much as the media headlines might suggest!

Before you search for any properties online, your first port of call should be a qualified mortgage broker. They can go through your finances and give you a good idea of how much you could borrow via a mortgage, putting down just a 5% deposit. Our sister company Mortgage Scout has friendly experts that specialise in helping first-time buyers. They should be able to explain the costs involved and talk you through any schemes in your area that can help you get on the ladder, for instance:

• Shared Ownership. This is where you buy a proportion of the property – commonly 25% to 35% to start with – and rent the remaining portion, usually from the local authority. You can then increase your percentage ownership over time until you’re ready to move on. This is a good step up from renting, as it means you can build equity that can go towards the deposit for your next home. Find out more from our sister company, SOWN.
  
• First Homes. This is a government scheme that lets FTBs buy a property for 30% to 50% less than the open market value. It can be a new home built by a developer that’s signed up to the scheme, or an existing home in the scheme that’s being resold. To qualify, you must earn under £80,000 a year and be able to get a mortgage for at least half the price of the home. While this is a great scheme, it is currently not very widespread. See the government website for more information.

Once they’ve helped identify how much you need to save, a good mortgage broker should also then be able to offer you some advice on how to do that and help you set a budget and timescale.

If this sounds challenging to you, don’t worry, you’re not alone! Most FTBs find it difficult in the beginning, but then usually end up saving more, much faster than they thought they would, because even small savings add up.

Here are our top tips on how you can save for a deposit:

Get a Lifetime ISA

If you’re aged 18 to 39, you can open a Lifetime ISA, which lets you put in up to £4,000 a year to save for a deposit (or retirement), and the government will add a 25% bonus to your savings, up to £1,000 a year. So, even if you can only save £2,000 a year, you’ll get a £500 top up. On the other hand, if you’re saving to buy with a partner and you can each manage to save the maximum £4,000 a year, that’s £2,000 in free extra deposit funds!

Reduce getting food and drinks on the go

These days, a take-away coffee can easily be upwards of £3.00 and a sandwich even more. So, if you’re in the habit of grabbing things on the go, switch to taking food and drink from home instead - or, if there’s a kitchen at work, keep some supplies there. Even if you only visit a coffee shop once a day during your working week, that could be costing you around £800 a year!

Supplement your income

Could you take on some part-time work a couple of evenings a week or at the weekends? If you’re trained or experienced in a particular area, could you take on some freelance tutoring? If you can earn just an extra £40 a week, that’s £2,000 a year.

Use a financial budgeting app to help you stay on track

There’s now a great choice of budgeting and money management apps that help you categorise and track your spending, set budgets and collate all your bank accounts in one place. That makes it much easier to see where your money’s going and where you might be able to cut back. Check out our recent article on the best apps.

If you’d like any advice on saving for a deposit or to find out about FTB schemes in your area, just get in touch with your nearest branch, and one of the sales team will be happy to help.