How to save to buy a house: 10 expert tips
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Loading... - Celeste Auclair
- 14 Jul 2022
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Looking at how to save to buy a house? Admittedly, buying your first home is getting more and more difficult, and the rising costs of living across the globe are making it more difficult to save for a downpayment on a house. On average, saving for buying a house now takes longer, not to mention that housing everywhere is much more expensive than it used to be.
So, yes, buying a house is tough right now. Is it impossible? Not necessarily. If you are in steady employment - and even if you are steadily self-employed - you can save money to put down on a house. It won’t be overnight, but rethinking a few habits can go a long way to giving you that all-important house deposit money. These tips all come from personal finance and real estate professionals. Follow them and you will have more money - which will bring that dream of homeownership a little closer.
1. ELIMINATE UNNECESSARY EXPENSES
Sound easier said than done? It’s not necessarily as hard as you think. George Clover, Partner at Helmores(opens in new tab) Estate Agents recommends rethinking any ‘get it now’ habits you may have acquired over the past few years: ‘whether it’s the weekly shop being delivered, that dress you fancy arriving at the door within 24 hours of ordering it, or a regular takeaway, when you stop to look at spending, you can usually see where savings can be made.’
The other major areas where unnecessary spending can be cut are subscriptions and memberships. Gym memberships are an obvious case in point -many people simply don’t use theirs or don’t use it enough to justify the annual expense. If that’s you, just cancel it. The same goes for streaming and music subscriptions - ‘are you actually using them all?’
2. SAVE ON CAR PAYMENTS BY GOING FOR A LESS EXPENSIVE MODEL
Clover advises that although ‘we all love a new car’, you do need to remember that when it comes to getting a mortgage,’lenders look at monthly commitments and having car finance is a big hindrance to your borrowing power. If you’re prepared to change your car for something less expensive while you save for a deposit, not only will you save the monthly payments, you’ll also not be compromising your lending amount.’ Amount saved? You’re looking at thousands.
3. RETHINK YOUR FOOD SPENDING
The average person spends hundreds every month on grocery shopping, takeaway and coffees - going for cheaper brands and eating out less is a reliable way to save thousands a year. We’re not saying ‘never eat out again’ - just watch how many takeaways you’re getting and whether you could cut down by cooking at home an extra couple of nights a week.
Top tip: You can still get top-quality and even organic produce at cheaper prices if you shop at local farmer’s markets.
4. DOWNSIZE!
If you are renting a home, this is likely to be your biggest expense of all, and without finding a way to cut down on this major source of spending it will be more difficult to save for a downpayment. Brean Horne, personal finance expert, advises that saving on rent ‘can be done by finding a place with cheaper rent, moving into a house share or staying with family.’
5. SET A SAVINGS GOAL
The reason many people struggle to save for a house is that they simply don’t plan for it and don’t set realistic goals. Horne explains that ‘setting unrealistic goals for your budget as this could leave you worse off than before, especially if you have to dip into your savings to cover your living costs.’ It is also helpful to remember that these days ‘there are lots of budgeting apps available that can help you manage your spending and saving. Some challenger banks also offer budgeting tools to help you manage your money.’
Horne also offers a simple budgeting formula you can try: ‘Using the 50/30/20 rule can help you make an effective budget that you can stick to. With this rule, you would split your money in the following ways’:
- 50% of your income goes to essentials, such as rent and bills
- 30% of your income goes to your wants, such as socializing or hobbies
- 20% of your income goes to your savings
6. LOWER YOUR ENERGY BILL
Although this can seem very tough right now, there are still ways to lower your energy bill even if you don’t have access to costly insulation projects. ‘Switching to cheaper deals for household bills can also help you save more. Price comparison websites can help you shop around and look through hundreds of deals quickly.’ You should also try to reduce energy use by cutting down on large appliance use - or getting energy-efficient ones.
7. ELIMINATE CREDIT CARD DEBT
As any personal finance expert worth their salt will tell you, you need to learn how to get out of debt before you even start saving. Being saddled with thousands in credit card bills makes saving inefficient because you’re still repaying interest.
8. INCREASE YOUR INCOME
This is a no-brainer: more income = more money for a downpayment. You don’t have to take on a second job if other responsibilities make it difficult, but you can explore quick ways to make money from home that can, in some cases, give you thousands extra you can put toward a house. Read More...
