Tips saving for A Mortgage

Unfortunately house prices in the UK, US and Canada have increased much faster than incomes. Despite the recent slowdown in house price growth, it is not easy to save a 10-15% deposit for a house. However, if you are frustrated with paying several hundreds of pounds a month rent, it is worth trying to save for your first deposit so that you will soon be able to get on the property ladder.

These are some tips for saving for your first mortgage.

1. Be Committed

It is always easy to find something to spend our money on. However, if we really wish to save for a deposit, we have to give it a high priority. One way is to have a target income to save each month. This can be a % of your disposable income or a fixed amount. After getting paid you can put this amount straight into the bank. At least by doing this you will not be tempted to fritter it away on other things.

2. Save on Rent.

The most effective way to save money is to look at whether you can reduce your biggest outgoings. This is likely to be your rent. It is a catch 24 situation. You want to buy a house because renting is so expensive. But, it’s difficult to buy a house because you pay so much for rent.

• To reduce the cost of renting you could look to see if you are able to rent out another room.
• A drastic option may be to live with your parents / relatives. This may create a slight loss of freedom, but, if the rent is sufficiently low it can really give you chance to save a considerable amount.
• A final option is to move to a different area where the cost of renting is lower.

3. Direct Debit

If you set up a direct debit from your current account to a savings account you will make sure you save what you want to. Look upon this outgoing savings as a necessary bill like paying for electricity.

4. Reduce unnecessary expenditure.

To maximise your savings. You need to make sure you are not frittering away money on inessential items. For example, it may be possible to cancel magazine subscriptions and just read things on the internet. If you are a compulsive spender, have a look at this guide to preventing overspending.

5. Reduce Debt First.

Unfortunately, many of us who finish college first, are saddled with student loans and student debts. If we have debts with interest rate of over 5% we should commit to paying off these debts first. Otherwise the benefits from saving will be negated by the interest on our debt. If the student loan is at a very low interest rate and has a long term repayment then it is OK to continue a separate savings scheme, rather than putting all our energies into paying it off. See: Reducing debt

6. Make Sure you Maximise your return on savings.

Don’t just expect your current bank to offer the best return on savings. The market is increasingly competitive, so look around for the best deal. You may start off with small interest payments, but as your savings grow you will increasingly gain.

• Guide to getting first time mortgage
• Getting Mortgage on Low Income