How To Save For A Mortgage And Plan Ahead To Buy Your First Home

💷+ 💷+ 💷= 🏡 (eventually)

Spending money on rent can be frustrating, especially when you consider Brits pay out, on average, between 23-41% of their earnings on it – and that hard-earned cash is paying off someone else’s mortgage.

But it can be tricky to get out the rental rut and onto the property ladder. In fact, recent figures from the Institute for Fiscal Studies indicate that homeownership, particularly among young adults, has “collapsed” in the past 20 years.

The good news? If you’re planning ahead to buy your own home, there are a few ways you can prepare to make sure you get the best deal. Read on for some expert tips on saving for a deposit and finding a mortgage that’s right for you.

Feverpitched via Getty Images

1. Get An Idea Of What You Can Afford.

Before you do anything, use a mortgage calculator to see roughly what you can afford to borrow. Most major banks and the Money Advice Service offer a free online calculator.

The calculations will be estimates, but they’ll give you an idea of what mortgage you might be able to get based on the size of your deposit. If you haven’t saved any money yet, add what you think you might be able to save by the time you make a mortgage application. You’ll also be asked your earnings and the length that you’d like to repay the mortgage debt.

“It’s really important people understand their budget and what’s possible for them to borrow on a mortgage to give them the opportunity to make a plan,” David Blake, a mortgage expert at Which, tells HuffPost UK.

2. Take A Long, Hard Look At Your Spending.

Most lenders will require you to stump up a deposit – sometimes tens of thousands of pounds of the stuff – to secure a mortgage. They often ask for 10% of the property value. But where on earth do you start if you don’t have any savings?

“The first thing people need to think about doing is making a budget planner so they know where their money is going and areas where, potentially, they can save,” Blake says. Are you hitting up ASOS and Amazon a little too regularly? Splashing out on weekends away when you could be saving? Signed up to a bunch of subscriptions and a gym that you don’t really use? Take a look at costs you can cut and redirect that cash to a savings account.

RomoloTavani via Getty Images

There are ways you can save on household bills, too. Is My Bill Fair, Compare The Market and USwitch all help you compare what you’re paying. If you find a cheaper deal then either switch to a competitor or ask your supplier for a better one.

3. Use Apps To Save Little And Often.

Every little helps and apps can make life easier when it comes to saving. If you bank with HSBC, Santander, Lloyds, NatWest, Nationwide, RBS, TSB, Halifax, First Direct, Co-operative Bank or Metro, you can use an app called Chip. This works by calculating how much you can afford to put away – and then deposits it into savings automatically. (It’s a bit creepy because the bot on the app talks to you, but the concept is sound).

Money Dashboard is a free app that describes itself as a “personal financial assistant”. If you have more than one bank account, it lets you keep track of your spending in one place and shows you exactly where your money goes.

4. Move Home, If You Can.

Three in every five homeowners under 35 use cash from their parents when buying a property, according to Legal & General. If you do have cash on offer, great. But if you don’t have the privilege of wealthy parents, there are other ways they can help.

If your parents live a commutable distance from your job (and will have you), you could save a lot by moving home and sharing bills with them. Some mortgages will also let your parents act as a guarantor, where they take on some of the risk by offering their home or savings as security on the loan. “There are a whole host [of mortgage types] out there, which people need to seek advice on before deciding what’s right for them,” says Blake.

5. Work Out Where To Put Your Savings.

“People need to look at their savings, and if they do have them, work out whether they’re getting the best [interest] rate on them,” Blake says.

Jirayu Siritorn / EyeEm via Getty Images

Compare interest rates on savings accounts online to see which bank offers the best deal – then move your money around accordingly. Most standard rates are pretty low at around 1.5%, which won’t earn you a fortune but is better than nothing. Higher interest accounts offer rates up to 5%, but restrict the amount you can deposit each month. Other accounts offer you a cash incentive to switch, which can sometimes earn you more than interest would.

The Help To Buy ISA can give you an additional 25% of the value of your savings, paid by the government, up to £3,000. There are some restrictions, however. Firstly, you can only pay in a maximum of £2,400 a year after the first year (which is frustrating if you’ve already been saving) and secondly, you’ll only get the cash bonus if you use it to buy your first property.

6. Find Out If You Can Get A Mortgage With A 5% Deposit.

Saving money can feel like an uphill battle, especially if you’re juggling other financial commitments. The good news is there are schemes out there to help you get on the property ladder if your savings are modest.

The Help to Buy government scheme lets you buy your first property with a 5% deposit. The government will lend you up to 20% of the sale price, then you borrow the rest from your mortgage lender. Blake stresses that while Help To Buy looks appealing, you should always seek proper mortgage advice first, as it depends on your personal circumstances. Your bank will usually offer it for free.