In today’s financial climate, saving for a home can seem like an impossible task for many but if homeownership is a dream of yours, try not to be disheartened. Everyone has to start somewhere, and the sooner you identify your goal, the easier it will be to figure out ways to reach it. Here are some tips on how to save for a house.
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Whether you’ve got your heart set on a period property or you’re dreaming of new build houses, it’s important to establish a rough budget as this will dictate how much you’ll need to save.
A mortgage adviser will be able to tell you how much you could reasonably expect to borrow based on your circumstances. Once you know how much your future house will cost, you can use the SMART acronym to set yourself a realistic goal and to work out how long it will take you to save.
What is the SMART acronym?
A SMART goal is a goal that is Specific, Measurable, Achievable, Relevant and Time-bound:
Specific: The goal should be specific enough so that it can be accomplished without much ambiguity. Create a budget that specifies how much money you can save each month. This will give you specific goals to work towards.
Measurable: The goal should have a clear measurement for success or failure. Set a goal that is trackable, such as saving a certain amount each month, so you can track your progress.
Achievable: The goals should be achievable with the resources available to the person setting them. Don’t make the savings amount too high that you fail to save it each month. Make it an amount you can realistically put aside each month without struggling.
Relevant: The goals should align with what is important to the individual who sets them. You want to buy a house? You need to save a deposit. The financial goal is relevant for the circumstances.
Time-bound: Goals should have a clear timeframe for completion. When do you need the deposit by? Set a timescale and make sure you save the right amount each month to reach the target.
If you want to start saving for a house, then now is a great time to review your current daily spending habits and see if there are any changes you could make to help you save money to put towards your goal. Even small changes can make a difference over time, such as taking a packed lunch to work instead of buying it.
It’s also a good idea to look at your bills and see what changes can be made there, whether it’s switching your energy provider or ditching that streaming service you don’t use. Increasing numbers of people are using budgeting apps to track their spending habits and expenses, which can give you a clearer picture of your finances and help you make changes.
Automating your savings removes temptation and is perfect if you worry that you’ll spend any extra money before it hits your savings pot. Set up a regular transfer from your bank account to your savings account and schedule it for the start of your pay month (for example, the day after your regular payday.) That way you’ll begin to think of it as just another bill that’s going out of your account so you’re less likely to miss it.
If you’re saving all you can and your dream home still seems like a long way off, you might want to consider boosting your income instead. Lots of people use ‘side hustles’ to bring in extra cash each month that they can set aside for savings or use for emergencies.
Do you have a skill that you could use to help others and bring in additional income? If so, there’s plenty of work out there for freelance translators, accountants, writers and illustrators. Or do you have a hobby that could generate an income, such as crafting or baking? Whether it’s selling things online or setting up as a freelancer, a side hustle can help you achieve your goal of buying a house sooner.
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There are lots of schemes out there to help you save for a new home. You may have heard of the LISA for retirement and its benefits, but you can also use the LISA for a first home deposit instead.
The Lifetime ISA is a savings scheme from the UK government that allows you to save up to £4,000 each year, with the government adding a 25% bonus. The LISA is a long-term savings account, which can be used as a deposit for your first home or in retirement. There are rules attached so check out the terms and conditions to make sure it’s right for you.
Another option is shared ownership. This scheme is usually for first-time buyers and people who have never owned their own homes before.
The shared ownership scheme will allow you to buy part of the home and rent the other part of the property from the government or housing association. Over time, you can usually buy more shares over time until you are in full control of your new property.
There is also the Help To Buy scheme which runs until October 2022. Help to Buy is the most popular scheme in the UK. It is aimed at first-time buyers who want to purchase a newly built property. You can use it with any mortgage provider, as long as they are participating in the scheme. The government will provide you with an equity loan worth 20% of the value of your new home, which you can repay when you sell your property or when the mortgage finishes. You can find more information here.
Various schemes come and go when it comes to buying a house for the first time, so it’s worth checking out the latest available schemes to see if they can help towards the cost of a new home and get you on the housing ladder.
How to save for a house: final word
As a first-time home buyer, it may be difficult to save up enough money for a deposit. Hopefully the above tips will help.