8 ways to save for a deposit
If you’re a first-time buyer - or even if you’re taking the next step up the property ladder and just need to boost your current equity and savings – you might be wondering how you’re going to be able to save enough money for the required deposit, especially during a cost-of-living crisis.
To help, we’ve put together 8 top tips to help you think about how you could cut back on current spending and make the extra money you need to get you into a new home.
1. Break it down and open a Lifetime ISA
The first step is to find out exactly how much deposit you’ll need, work out how much the Lifetime ISA can top your deposit up by, and then break it down into smaller amounts to make saving up seem much more realistic and manageable.
For instance, if you’re aiming to buy a property for £150,000 and need a 10% deposit, getting together £15,000 could sound like a huge challenge. But, if you are eligible for a Lifetime ISA, you can secure £1 for every £4 you save, up to £4,000 each tax year.
So you don’t actually need to save £15,000, you only need to save £11,250. If there are two of you saving, this would half to £5,625.
If you aim to buy in three years’ time, that means you will need to save either £312.50 or £156.25 a month if there are two of you.
2. Keep a record of everything you spend and save
Go through an average month and write down everything you spend money on: shopping at the supermarket, fuel for the car, going out with friends, presents for loved ones, holidays and weekends away, books and magazines, and so on. Keep a running spreadsheet and make a habit of recording what you spend each day, then task yourself with spending less and less each month.
3. Stop buying take-out coffees and ready-made sandwiches
This is probably one of the most common suggestions for people trying to save money, but that’s because it really does work. A latte from Starbucks, Costa Coffee or one of the other high-street chains is around £3 these days, which might not seem much at the time, but just one a day during your working week makes £15. That’s £60 a month and a whopping £720 a year – assuming you take a few weeks’ holiday! Take a look at what you spend each week on convenience food and drink and consider how much you could save across the year simply by bringing in your own from home.
4. Cut back on going out – have fun at home instead!
If you go out for meals or to pubs and nightclubs with work, friends or family, could you all save by taking it in turn to visit each other’s homes? This doesn’t mean you shouldn’t go out at all, just keep it for special occasions, rather than a regular habit. And could you ‘supersize’ this saving tip by volunteering to be the designated driver for your friends as long as they chip in for the fuel and keep you topped up with soft drinks?
5. The next time your phone is due an upgrade, downgrade!
The latest tech might be fabulous, but you can still get a perfectly decent handset for a fraction of the price. Ask about a slightly older model that’s not 5G enabled – they’re much cheaper - and could you get a lower-cost plan? You may be able to reduce your monthly smartphone bill by £30 a month or more.
6. Ask family and friends for money instead of gifts
If your nearest and dearest usually buy you presents for your birthday and at Christmas, make sure they know you’re saving for a deposit and ask them to give you the cash they would have spent on a gift. Every little bit helps, and you could be surprised how much it adds up over two or three years.
7. Car share
This could be a tough ask if you’re used to having your own transport, but if you have a flatmate, partner or family member that would be willing to share a vehicle with you for a year or two, that could save money. And selling your car would be a quick way to instantly boost your deposit fund and instead consider using a car sharing company such as Zipcar.
8. Take on some extra work
You may already have a full-time job, but could you do some extra freelancing or take a shift in a local café or bar at the weekends or if you love the gym, could you work for them part time, earn some extra money and cut back on the cost of your membership? If you can find a way of turning a hobby into a money earner, this can be a great way to help save for a deposit.
If you’re a first-time buyer in England, you may also be able buy a home for 30% to 50% less than its market value under the Government’s First Homes scheme, plus there may be shared ownership options available in your area. Taking advantage of either of these schemes could mean a much lower deposit is needed than you originally thought.
Ultimately, saving for a deposit will probably put a dent in your lifestyle, but if it’s only for a few years and means you’ll have a home of your own, it could be worth it.
To find out what you can afford locally and the level of deposit required for the type of property you’d like to buy, firstly speak to one of the team at our sister company, Mortgage Scout. They can help you understand your options and work out how much deposit you’ll need to save. You can then speak to one of our property experts who can explain local property options and schemes to help you on the ladder.
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