How To Realistically Save for A Deposit While Renting | Tips for First Time Buyers UK
Getting on the property ladder is a goal for many renters.
The best tip for first-time buyers is to save as much as you can.
The challenge is, how do you save money when you still have present-day obligations to pay for.
One of the biggest obligations is the rent.
When we started saving for a house we realised how steep the mountain is for saving for a house whilst renting.
Today, we’re going to share with you our tips for saving for a house whilst you’re still renting.
These tips should enable you to reach your goal of being a homeowner.
How To Save For A Deposit While Renting
We found there to be two big problems with saving for a deposit while renting.
First, the amount to save for a house deposit is quite a steep amount (more on this soon).
Secondly, rental payments take up a huge chunk of our budget too.
We almost felt like we were trying to take water out of a sinking ship.
We say almost because we found ways that worked for us.
How Much To Save For A Deposit While Renting?
The amount you need to save depends on a number of factors, largely the house price.
And the house price largely depends on the location, amongst other factors.
Normally, you’ll need to save 10% of the price of the property as a minimum.
The more you save the better mortgage deals you get as you’re borrowing less money.
However, you can leverage Help-to-Buy schemes to buy a house with a smaller deposit.
Let’s look at the average house prices in the UK to give you an indication of how much to save.
According to the HM Land Registry UK House Price Index (Oct 2021), the average house price in the UK is ~£285,000.
The graph below breaks that down further into the different regions.
| Location | Average House Price | Average House Deposit (10%) |
|---|---|---|
| South England | £330,000 | £33,000 |
| London | £520,000 | £52,000 |
| Midlands | £230,000 | £23,000 |
| North | £170,000 | £17,000 |
| Scotland | £180,000 | £18,000 |
| Wales | £200,000 | £20,000 |
| Ireland | £160,000 | £16,000 |
At the lowest end, we have £16,000 and £52,000 at the other end.
These are hefty amounts to save no matter your situation.
The ‘easiest’ thing to do is to buy a house in Ireland, right?
Well, it wasn’t our plan no matter how much cheaper the house prices are.
So, don’t let these figures deter you.
Let’s break down our 5 tips on how to realistically save for a deposit while renting.
Reduce Your Rent
Rent is one of the biggest things out of your budget and reducing this will change the game.
You have some options to reduce your rent.
you could consider getting a roommate if you have a spare room where you rent.
Have a discussion about this with your landlord and see if they’ll agree to this.
You could negotiate a lower rent as now there’s two of you.
Alternatively, you could look to move somewhere with cheaper rent.
We’d say moving in with family or friends is the best option.
This is potentially the best option from a savings perspective.
You may share some costs with family but there’d be nowhere near renting a place.
Reanalyse Your Household Expenses
Time to analyse your household bills, especially if you’ve had them a while.
Usually, they creep up year on year and you can definitely get a cheaper option elsewhere.
There are two ways in which you can create savings from your household bills.
First, you can start looking around for better deals.
Look for alternatives for your utility bills, broadband and TV subscriptions.
Secondly, you can alter your home living habits to save money.
This can include switching the plugs off of unused appliances to not running the tap when brushing your teeth.
These may seem minuscule in the grand scheme but they add up over the long term.
Bear in mind it could take you years to save up for your house deposit.
Repurpose Your Lifestyle Expenses
Your lifestyle expenses are those that beyond your living expenses.
These are the things you have that you can live without.
Think of things like subscriptions to Netflix, Playstation or weekly Wine deliveries.
This can also include eating out, takeaways and other lifestyle expenses you can live without.
The point is not to completely cut everything out and live a boring life.
But to ask yourself what matters more between each expense and your goal to buy a house.
Boost Your Savings
There are two main things we did to boost our savings when we saved for our house.
Firstly, we sold off some of our personal belongings.
We had various things around the house that we weren’t using and could live without.
This included furniture, clothes, gadgets and other items. in the house.
You can do the same to turn unused and unloved items into cash that you can save for your house.
Secondly, we leveraged accounts that boosted our savings.
We saved into an account that gave a 20% bonus above our savings when we bought our house.
Currently, you can use the Lifetime ISA in the UK to boost your savings.
This gives you an annual bonus as part of your savings.
Increase Your Income
The above tips only go so far to save for a deposit while renting.
There are ways to live well on a small income however, more money will supercharge your savings.
There are plenty of options to increase your income via multiple side hustles.
You could take on babysitting or petsitting or start buying and selling items for a higher price.
Or, increase your salary at your current job or look for a new higher-paying role.
Increasing your income allows you to direct all that extra money towards your house savings.
Take Action
Which tip are you going to put into practice to save for your deposit while renting?
We’d love to know how we can help you further reach your goal of being a homeowner.
One way is to up your money game by signing up for our FREE 10-Day Money Course.
Knowledge is powerless without action.
So take action!
Thando & Lindie
