Saving for a mortgage is not easy. In fact, it can be nearly impossible for so many people.
I’ve read a lot of articles in The Guardian lamenting about how crazy it is that many ‘millennials’ can’t afford to buy houses.
These articles always transpire to be written by some rich couple with access to an unlimited pot of money. Surprisingly, it is exceptionally easy to buy a house when you have unlimited money. What a revelation.
We had privileges; the privilege was that we could live at our parents’ houses while we were saving. I appreciate that not everybody has that option, but this article should (hopefully) help you whatever stage you’re at.
We started by putting together a plan. Where did we see ourselves in five years? This isn’t just in relation a home or a mortgage but in relation to our careers.
If you’re thinking of taking a huge career leap, it’s best to do it while you’re at your parents or while you have financial freedom.
If you don’t have the luxury to live with your parents while you save (for example, you’re saving whilst renting at the same time) making a big career change isn’t impossible but it just takes more planning.
For me, it took a period of about 8 months of working full-time and writing in the evenings. I decided to become a full-time freelancer while I had a mortgage, so it is possible, but you are going to have to go through a period of hard work to get to that point.
Decide on your budget
Once you’ve established your five year plan and accounted for any huge lifestyle changes, look at how much you can realistically save each month.
I would recommend taking three months to just see how it goes – with no plans. It gives you a chance to look at what’s reasonable.
You don’t want to put a huge plan together only to find out two months down the line that it’s completely unachievable and making you unhappy.
Factor in things like holidays and little luxuries like eating out. Some people will be happy to forgo these while they save, others won’t. Take a really close look at your spending habits throughout the course of the three months and consider areas where you might be able to save.
Monzo is really good for this. It tells you where you’re spending your money each month and allows you to set limits in each area. James and I have set limits in how much we eat out which is very helpful.
Consider your debts
Your debts will hinder how much money you can save and borrow, so it’s best to try to get those down as much as possible before you commit to a mortgage.
Plus, you want to get rid of your debts as much as possible. Moving house is expensive (costs like solicitor’s fees and moving fees aren’t often accounted for and it does add up), so make sure you aren’t putting yourself in financial jeopardy.
Make a list of your debts and put together a realistic plan for paying them back. Things like loans on your cars can be the difference between getting a mortgage and not, so if there’s room to tighten up things like that (we sold our car when we first bought our house) then it’s worth doing if you can realistically be without it, of course.
Start paying your mortgage
If you’ve done your research, you’ll have a rough idea of how much you’ll be spending per month.
6 months – a year (preferably a year) before you move, start saving your mortgage payment every month (plus additional bills).
If you’re renting, then it won’t be possible to save for the mortgage on top of the rent (if you can, then great!) — instead, add the rent and any additional bills to the ‘overall’ cost of your mortgage and just put away any difference between the two.
If you’re successfully renting, you’re probably in a pretty good position to buy a house anyway and it’ll likely be the deposit that is taking time.
A little note on renting
Go at your own pace and don’t put pressure on yourself. It’s easy to see other people at different stages on the housing ladder, but this is about your journey.
Renting is not a bad financial decision and it bothers me a lot when people say it is. In fact, I think it’s very sensible. If it’s the first time you’re living with somebody, it gives you an opportunity to check you both work as a cohabiting couple. It also gives you a chance to check you can really afford to pay for it without the hassle of being tied into 30 years of payments.
Put savings in your account as soon as you get paid
The biggest mistake (in my opinion) that people make when saving for a house (or anything else) is to put money into savings at the end of the month.
If you’ve got it, you’ll probably spend it.
Instead, put money into your savings account as a priority. If you are desperate for it, you will be able to access it, but it’ll stop you from making frivolous purchases just because you can see the money is there.
Take a real hard look at your expenses
When we looked at our expenses, we noticed some holes that we wouldn’t have if we hadn’t done a big dive into them.
Firstly, we spent too much money on eating out, which started to save us about £100 per month. That, added directly into savings saved us £1200 per year.
If you eat out in sociable settings (but feel like you really need to save the money) then invite people over for a home cooked meal. It’s usually nicer anyway.
Cut back on things like gym memberships, subscriptions and little monthly costs that always end up adding up. Look at how much your car is costing you versus how essential it is. Could you look to get something cheaper?
This might seem extreme, but these are the types of questions you will need to get comfortable with asking yourself when you’re looking to buy a house.
Speak to a professional
This is probably one of the most important steps to take. People think that mortgage advisors are only available once you’re ready to get your mortgage. That’s not the case. They’ll give you advice on how to reach your targets.
This might include:
- Decreasing debts to make mortgages viable
- Steps you need to take if you’re self-employed or employed on less ‘stable’ contracts (don’t get me started on this one, but banks are stuck in the 1950s).
- Considering whether it’s possible to share a car or sell your car. That can make a really big dent in your deposit if you don’t need it.
- Cancelling all non-essential subscriptions.
Whatever your situation, you can make it work. Sure, for some it will take a long time but hey, that’s totally ok. Anything is achievable if you put your mind to it and I hope people don’t read these self-gratifying articles from rich people and get put off by it all.
If you enjoyed this, why not find out whether you’re cut out for freelancing.