How to Build your Housing Piggy Bank

How to Build your Housing Piggy Bank

It is most people's dream to own their own place but with 99% mortgages a thing of the past and the huge amount of cash now needed for a deposit, the prospect of saving enough money is certainly daunting!

Nevertheless, you will find colleagues at work who are on similar salaries that are paying a mortgage because with clever money management, they have achieved the almost impossible! Here are some good ways to kick start your own savings and once you have, it can become a monthly quest to save as much as possible!

  1. Open a savings account

If you don't have a savings account, now is definitely the time to open one! There are various ones available some are based on a certain amount being paid in regularly and whether you need instant access – if you make regular payments and you don't mind your money being tied up with time limits you will definitely get better interest rates. Other accounts can be opened with a small amount and can be added to whenever you want – it is best to have both types! Before you open the account, shop around for the best interest rates and consider opening your account with Halifax, Barclays, Santander or National Westminster as this 'Big Four' are participating in the Government 'Help to Buy' scheme (more later!) Look at ISAs too, the Government has backed a Help to buy ISA.

If you find that the best interest rate accounts need a good sized first deposit payment – which you don't have, then have a good sort out of your possessions and anything you don't need get sold on eBay, Gumtree and similar. It is amazing how much money can be raised in this way.

  1. Establish your budget.

This sounds logical, but few people can really account for every pound they spend! This is a time-consuming exercise to set up, but it is essential! The calculations are best done on a spread sheet but a large A3 piece of paper works well and importantly, they will show exactly where your money is going...

The first figure to enter is your gross wages for the month and then you need to subtract your tax, National Insurance and any other stoppages as this will give you your net wages. Next you must list all your monthly payments such as rent, student loans, car loans, transport costs, insurance policies, saving deposits etc. and deduct these from your net wages and this will leave you the amount that you have to live on. To evaluate exactly what you spend your money on and how much, it is best to keep a log and all the receipts for one month – and be prepared to be shocked! These records should be kept updated every month.

After just one month, you will be able to see exactly where your money goes and can have a good think about ways in which you can save more money:-

  • Do the credit cards you use offer you the best interest rates?

  • If you have a car loan, is it the best value one available? Is your car insurance good value? Good to regularly 'shop around' for both.

  • Is your car the most economical one for you or is it worth changing it?

  • If you spend quite a bit on going out, can you cut down the number of times you go out each week and lower the bill by opting for cheaper drinks or fewer?

  • Do you spend money on take-away coffees and lunches? Far cheaper to make your own at home and take them to work!

  • Do you often buy takeaways in the evenings too? Even if you can't cook, there are many simple meals that you can make yourself – go online for ideas!

  • Are you a clever shopper? All the supermarkets have food reduced 'for quick sale' at certain times and also have their own brands which are much cheaper. Buying birthday and Christmas presents in the 'sales' can save a surprising amount of money.

  • Cut the luxe! Choose cheaper hairdressers, cancel your gym membership and get the best value mobile contract.

  • If you are a smoker.... need I say more about saving money?

  • Do you splash out on magazines? There is so much now available online.

  • Do you buy lots of clothes? Is it worth refraining from 'impulse buying' and only buy items you really do need?

  • Get a really large jar or whisky bottle and regularly pop your loose change into it – anything under 10p must go in – you will be amazed how easy it is to save £30!

  1. Check out your credit rating.

It is good to have a strong credit record and certainly when the day comes, you will need one to secure a mortgage. Interestingly, as many as 20% of ratings are incorrect so whilst time is on your side, it is well worth checking it out now and if you feel something is wrong, then don't be afraid to query it.

  1. Save your windfalls!

If you are lucky enough to be given money for birthdays and Christmas – bank it and if you get any bonuses at work or a tax rebate – bank them too! You may be left some money in a will that proves an unexpected bonus – don't fritter it, but add it to your savings right away.

  1. Earn some extra money.

There are many different ways to earn extra money including babysitting, house cleaning and freelancing. If you make a search online for your area, you will find numerous part-time/evening jobs including catalogue delivery, envelope addressing and answering market research questionnaires- seize the opportunity to earn some extra money to boost your savings!

  1. Can you downsize?

If you are in rented accommodation, it is probably the amount of money that you pay your landlord each month that got you thinking about buying your own home!

Is it possible to downsize to a cheaper property or can you get a flat share? Both of these options save money. If you are single, moving back in with your parents for one year could easily save you more than £10,000 a year and even if you pay 'board and lodgings' you will still be 'quids in' which is why so many young people carry on living at home for longer.

If you’re looking for a fast way to downsize you may want to consider selling to specialist house buyers who can guarantee a quick turnaround.

Ways to make your dream come true

At present, a deposit of 20% is usual although there are more 90% mortgages available on the market. In reality, a 20% deposit means £20,000 or more – scary! Even if you are saving £250.00 a month, it will take more than three years (40 months) to save £10,000

and if you save £150.00 a month you will need more than five and a half years (67 months in total) to save £10,000.

Do you have a good friend that you could buy the property with? You will have to have the agreement drafted legally and it is essential that you discuss what will happen if one of you wants to sell in the future. The other way of getting on the property ladder sooner is the Government's 'Help to Buy' scheme which requires a 5% deposit on a new build property, the Government loans you 20% and you will need to get a mortgage agreement for the remaining 75% from one of the four participating banks. You will need to begin repayments to the Government in Year Six of your ownership of the property - food for thought indeed!