One of the questions I get asked most is “what are your tips for saving for a mortgage?” In all honesty, I didn’t find it too challenging and I know that’s so annoying to hear. I’ve always been very organised and good with money ever since I got my first job at 14. I’ve had to pay my own way in life and be financially independent so the prospect of saving money wasn’t really anything new.
Even though I never really struggled with actually saving money, I do think it can be hard to find the balance between saving for future plans whether that’s to travel the world, buy a car or invest in your first property, and living in the moment. Sometimes you can find yourself so focused on saving money that you forget that you are allowed to actually spend it and enjoy yourself as well. I’m definitely guilty of that.
So today I’m going to run you through some tips for saving for a mortgage and even if you’re not saving for a property, these tips might be helpful anyway!
First off, I’m just going to put it bluntly.. Whether you’re saving for a three bedroom house or a studio flat, buying a property is expensive. It’s not only the deposit you need to save for which can be anything from 5-20% of the selling price, but everything else as well (the figure in brackets is roughly what we paid but bear in mind it’s different for everyone):
- Reservation fee (£500 refundable)
- Stamp duty (first time buyers don’t have to pay stamp duty on the first £300,000 but unfortunately our house was over that so we paid £500)
- Legal fees (£1,100)
- Valuation and surveyors fees (I can’t remember if we even had to pay for these but if we did it was around a few hundred quid)
- Mortgage advisor (£400)
- Removal van if you need it, fortunately we didn’t
- TV licence (£155)
- The first few months of your mortgage/rent, service charge, council tax, utility bills, building and contents insurance, life insurance, furniture, food shops (all in all, this costs us around £1,500 a month)
Before I crack on with how I saved for a mortgage I just thought I’d add a little disclosure in here to say I saved all my money myself and didn’t have anything given to me from family or anything like that. It might sound impossible to do it on your own but I promise you can do it!
Start saving early
If you’re even thinking about moving out within the next five years then it’s 100% worth getting into the swing of saving. Fortunately because I started putting money away years ago, it wasn’t such a shock when the realisation hit that we had to stick a deposit down and all my money was going to get sucked up into a house. It’s just logic that if you start saving sooner, you don’t have to save as much each month and I can’t encourage people enough to save whatever they can. Whether it’s £20 a week or £300 a month you can put aside, it will all be a massive help when you come around to the house buying process. You’ll look back at yourself and think, “what a good egg I was saving all that money back then” I PROMISE!
Hunt for the best savings accounts
There is a whole world of ISAs and interest rates which I had no clue about when I first started saving. Thank God for my dad who came along with me to Nationwide when I was setting up my credit card and savings accounts otherwise I wouldn’t have had the foggiest. Shout out to Graham!
Basically you need to look for high interest savings accounts which will give you the highest amount of interest (duhhhhh?) when you save your money in them. When I set up my first one a few years ago, the deal was 5% interest on balances up to a specific amount (sorry I can’t remember what) and the maximum I could deposit into it each month was £500 – since then I’m pretty sure it’s all changed but the principle is still the same. It’s not like you earn masses from them because they only last a year but it’s well worth setting up for that extra bit of cash.
Set up a direct debit
For me, it really helped when I didn’t actually have my savings in my everyday current account. It gives you a better indication of the disposable money you have to spend and prevents you from spending your savings (especially when you know if you withdraw it, you won’t receive the interest). Every month I get paid on the 21st, so I’d make sure all my savings were transferred into my numerous savings accounts by the 25th, then I knew that anything left in my current account was okay for me to spend. I think it really helps when you save the same amount every month as you kinda get used to living off of the remainder of your salary and then if you have any left over then that’s a bonus!
I’m gonna be completely honest, I didn’t budget at all whilst I was saving for a mortgage. BUT I do know that it has helped so many people when saving for anything (not just a house). I created a budgeting spreadsheet a couple of years back with columns for basically anything I spend money on – rent, food and drink, going out, travel, insurance, shopping, etc. and it was always up to date so I could see how much I spent each day, week or month on each category but I didn’t necessarily use it to budget if that makes sense. If anything, it just made me realise how much I spent on particular things – I didn’t realise you could spend too much on pizza and Kronenburg?!
If you think a budgeting spreadsheet could really help you with your savings or even if you just wanna know whereabouts your pennies are going, then go for it! Rhianna has written a huge post on how she created hers which you’ll find handy!
Get a Help To Buy ISA (or Lifetime ISA)
I touched on this in my post on tips for first time buyers but guys it’s important so please don’t overlook it! This is free money. I repeat, THIS IS FREE MONEY. So bloody take it will ya?
All you have to do is pop a bit away for at least three months (£1,200 is the maximum deposit in the first month and then £200 after that) into a Help To Buy ISA and you’ll get a 25% government bonus on amounts saved between £1,600 and £12,000. So if you save £3,000, the government will give you £750. That might not sound like a lot in the grand scheme of buying a property but seriously, anything helps! Obviously, it helps the longer you have the account so like I said about the whole start saving early thing, try and set up a Help To Buy ISA as soon as you can to reap the benefits. Also, if you’re buying a house with someone else, you can both open Help To Buy ISAs so that could potentially be an extra £6,000!
Update: The Help To Buy ISA is now being replaced with a Lifetime ISA which enables you to save more and receive the 25% boost on properties up to the value of £450k. You can find out more information here on what the differences are between both ISAs in case you want to set one up soon as November will be the last month you can open a Help To Buy ISA.
Stop being so generous
I’ve always been a very generous person and I love spoiling my friends and family on special occasions but when you really need to save, you’ve gotta kick the Mr Nice Guy persona. I’m not saying go full on selfish and never spend your dollar on anyone else but just be a touch more savvy. For example, I didn’t go overboard at Christmas on presents and I cut my budget a bit for Toby’s birthday present (it was a mutual agreement haha). Another thing to keep an eye on is how much you spend at the pub buying rounds or lunch for your friends.. Obviously we all owe people a drink every now and then but try not to waste too much money unnecessarily.
Now I haven’t actually used Homewards as I’d already moved in before I found out about it but it sounds like a sick idea! It’s basically like TopCashback so you get automatic cash rewards when you buy from certain shops (including Amazon, Feelunique, Waitrose) and the money you earn can only be used for a deposit. You can get your family involved as well so anything they spend can also contribute to your deposit. I don’t think there’s anything to lose by trying it and if you do give it a go then please let me know how you got on!
Even though it’s a dream for most of us to buy our own houses one day and all we wanna do is save save save, it should never have to negatively effect your social life or make you unhappy. Please remember that you shouldn’t have to sacrifice holidays or going out with your pals just to afford a mortgage. As with most things in life, it’s all about balance!
If you have any questions about mortgages or saving for your first home then please just tweet me and I’ll try my hardest to help!
Do you have any tips for saving for a mortgage?