Being Realistic about saving for a Home | How to save for a house
If you're wondering how to save for a house, without depriving yourself of the things you love, look no further.
When saving up to buy a house, you may think you have to stop buying the things you love. However, this isn’t always true. There’s many small swaps you can make in your weekly supermarket shop that can help you save money without even realising it! If you’re in a hurry, you could make a few sacrifices to spend less and save more – but don’t forget to keep living, and prioritise what’s truly important to you.
Let’s have a look at how to save for a house without missing out on buying the things you love. We’ll also have a look at the best Lifetime ISAs for first time buyers.
How to save money for a house without scrimping
Saving for a house shouldn’t feel like a chore, or by the time you get there, you’ll resent the entire process. It’s not realistic for many people to assume you’re going to get to your goal and have the keys in your hands within 18 months. So in the meantime, you can still live your life, while saving. There’s no need to cancel all of your subscriptions and stop doing the things you can enjoy.
You can get towards your goal even quicker by managing the money you do spend, and moving things around to save in reasonable chunks. For example, I’ve been known to overspend on trips to coffee shops, but I learned quickly that my caffeine addiction can be kept under wraps with a jar of coffee a month – that costs the same as 1 trip to buy a latte!
Another useful tip I came across since becoming a mum, is that many products that you can find in the baby isle at most supermarkets cost less – and can be used for grown-ups. Everything from sponges to cotton buds. Top tip – if you have coloured hair or a sensitive scalp – baby shampoo is all natural, kind to skin and costs a fraction of name-brand ‘colour protect’ shampoos that still make your colour fade!
One way you can save money for a house deposit without scrimping out on the things you love is by switching to cheaper versions of your everyday products, especially branded products that are easily switched out for an own name product.
It’s a good idea to also keep on top of which supermarkets are offering the best prices at the moment. You can compare prices of every day products on many comparison sites, such as Trolley.co.uk. According to Which? As of June 2022, Aldi is the reigning champion for cheapest supermarket, closely followed by Lidl, and then ASDA. But if you are working to save money – stay out of the middle isle at all costs. You will never use that snorkelling gear – yes, I am speaking from experience.
You can find multiple different comparisons of supermarket and shop products here and here. This shows the comparisons between products such as makeup wipes and cotton buds. By simply switching the brand of makeup wipes you buy, you could be making savings without even noticing.
Price comparison sites can be your best friend when you start a savings journey. They’re an amazing resource in finding out how to save without sacrifice! It’s well worth a little time spent finding out how to save money on the things that matter to you.
Financial journaling
If you want to know how to save for a house, financial journaling is definitely a step in the right direction. This allows you to be more accountable for how much money you’re spending and figure out ways to save. Saving money doesn’t mean you have to stop buying things you enjoy, it means finding a way to balance out the amount of money you spend and save.
Writing things down and putting your finances onto paper can unscramble your brain and allow you to clearly see how much you’re able to save. This is why you’ll see friends writing down weight loss or workplace goals - writing things down makes it easier for us to smash our goals and hold ourselves accountable.
It’s also recommended you give yourself some leeway - being too strict on yourself is unlikely to be sustainable. It’s not about missing out on buying your favourite things, it’s about finding cheaper options and making small changes to reach a bigger goal.
First Time Buyers
You may want to look into opening a Lifetime ISA (LISA) if you’re purchasing your first home. A LISA is an Individual Savings Account any UK resident aged 18-39 can open and use to save up to £4,000 per year for a deposit on a home with a value up to £450,000. Additionally, the government offers a bonus of 25% on top of this money. It’s like being paid to save
You can save up to £4,000 each year with a LISA. This means, with the government’s 25% bonus, you could save up to £10,000 for a house deposit within two years. We don’t want to brag, but we also offer an interest rate of 1.5%** (the best available to the general public).
How long does it take to save for a house?
The time it will take you to hit your goals is dependent on a few factors:
- The value of the houses you’re interested in
- How much you can afford to save each month/year
- What type of savings account you’re using
- Whether you’re saving alone, or as a pair or group
Let’s say, for example, you’re a first time buyer, using a Lifetime ISA, and putting away the maximum annual amount of £4,000, to buy a house valued at around £250,000:
- The average deposit (15%) on a house of this price would be around £37,500
- If you’re using a Lifetime ISA, putting away £4,000 per year and getting your £1,000 government bonus – it would take you around 7.5 years if you’re saving on your own.
- If you’re saving as a couple, you’d be looking at just under 4 years.
A simple way to do the maths, and figure out what’s realistic for you:
- Find out the average price of a house in your chosen area (you can find some info on this here)
- Find out what 15% of the value of your ideal property would be, you can use a simple percentage calculator to do this.
- If you’re planning to save the maximum annual allowance in a LISA, you can then divide the deposit amount by 5 if you’re saving alone, or by 10 if you’re saving as a couple.
Of course, a Lifetime ISA isn’t the only account you can use to save – it’s just the only one that offers the hearty government bonus. With that being said, you’ll also need to have a look at other options if you’re not a first time buyer. In addition, you may choose to open another savings account if you want to save more than the maximum annual Lifetime ISA allowance (£4,000) or to cover some of the extra costs that come with buying a home,that a Lifetime ISA doesn’t cover. (LINK TO COSTS BLOG)
If you need financial advice, you can take a look at www.unbiased.uk.
And Don’t Forget to be Truly Realistic
Life happens. There’s a good chance of hurdles coming up while you’re on your way to your goal. The most important factor is to manage your expectations, and not be disheartened if you don’t get there in exactly the timeframe you planned to.
In the meantime, we can help save you some time on all the research that goes into getting ready to buy your first home. Check out our Knowledge Hub for more.
*Terms and Conditions Apply**Figures based on independently verified research conducted by Mustard Research – accurate as of April 2022
