Possibly one of my most-requested posts EVER, today I thought I’d finally sit down and divulge the details of how I saved for our house deposit.
Growing up, I didn’t doubt that one day I’d eventually have a place of my own, but I’d never really considered the logistics of it. I suppose a naïve part of me assumed it was a case of ‘see house, buy house’ and even after I decided I wanted to own my own house, I spent years grappling with jargon like deposits, stamp duty, house surveys, valuations, arrangement fees, etc.
I first realistically thought about buying a house back in 2016 when I was 25, which feels incredibly young in hindsight. I was freshly home from a stint living in Hong Kong with no cares about where my money was going – aside from several designer handbags! – and my younger brother told me he was heading to visit a bank manager to start discussing a mortgage. A mortgage! I needed to pop to town anyway, so I tagged along and ended up speaking to an advisor myself.
She explained to me how mortgages work and calculated how much I was likely to be able to borrow based on my financial situation at the time. Bearing in mind I had just quit my job and was starting out as a freelancer, that initial meeting both shocked and motivated me to begin saving for a deposit on a house.
In short, a mortgage is a big loan from the bank. You put down a deposit – starting from as little as 5% of the property value – and the rest can be borrowed from a bank, depending on your income. As a general rule of thumb, you should be able to borrow four times your income, although of course it certainly isn’t a one-size-fits-all scenario here. In 2016, based on my very inconsistent freelance income and three years’ of accounts, I’d be able to borrow £110k with a deposit of £22k. Basically: not enough.
As with everything in life that I decide to take on, I applied myself wholly to the task. I studiously researched solicitors’ fees, valuations, stamp duty (which has since been abolished!), and all the rest of it. I ploughed myself through research of all of the government schemes – Jess and Kristabel have both shared brilliant posts about these – and then set about figuring out how much I’d ideally like to save, when by and how.
Once I had an ideal figure, I set myself a dream date (it has since passed, FYI!) and divided it up. Then, I looked at my finances at a granular level. I raked through with a fine-tooth comb and made certain I’d be able to make the savings I wanted to. But I also knew there would be no room for ‘error’ in this method.
Here’s how I saved my deposit:
Self standing order
A money-saving tip I always recommend is to set up a standing order to yourself. Especially great if you have a monthly or regular payday, simply transfer a set amount to yourself that automatically comes out. Over time, you won’t miss that larger chunk. I had a standing order of £450 going into a separate savings account. This was my minimal savings amount, and I effectively forced myself to live off whatever was left. Although I live with my parents (fairly normal in Chinese families), I pay my parents housekeeping and help with one of the main bills, so I’m not actually living rent-free.
I also signed up for a Monzo account around 2 years ago. Originally this was for using abroad, but it’s quickly become my number one tip for tracking spending and, more importantly, curbing my spending.
Each week, I add a set figure to my Monzo account and this is my spending money for the week. I toyed with a monthly figure in the past but found that to go completely off-piste as my plans chop and change so much. Instead, when I do my weekly bullet journal session, I roughly plan in how much I’ll need to cover travel, lunch dates, a dinner date or any errands like Post Office runs and expenses (ahem, skincare splurges). This number gets transferred into my Monzo and formulates my weekly budget.
Anything leftover goes straight into my separate savings account, and then I start again the next week using the same process. (It’s probably worth nothing that I’ve never really got on with the Pots feature on Monzo.)
Cutting back on spending
A quick scroll through my Instagram will reveal that I haven’t drastically changed my lifestyle in order to save. I’m lucky to live at home with my parents and pay a drastically reduced rent to them, but my other ‘big’ expenses are all business-related and are therefore non-negotiables.
I only allow myself lunch out once a week, and Harvey and I take it in turns to pay for date nights.
Moreover, I adhere to my four-items-a-month spending regime as documented in my bullet journal. I can’t stress how motivating it is to have a dedicated, tangible page to track my spending. However I continued to buy new clothes, socialise with friends, go on holidays and generally keep up my normal lifestyle, I just clawed back on expenses by only having one drink (or none), saying ‘no’ to plans that’d mean going out more than twice a week, and doing my own version of Extreme Couponing.
Help to Buy: ISA
When I went to that initial mortgage meeting, I also set up a Help to Buy: ISA. This is incredibly useful as the government will give you an additional 25% of whatever you have saved. So if you manage to save £2000 in the scheme, you’ll receive a bonus of £500, bringing you to £2500.
It’s a generous offer and super achievable. You can deposit £1200 in the first month and then £200 per month after that, and I couldn’t recommend it more. However this is also a somewhat cheeky inclusion as you can’t technically use this for your deposit or the surrounding fees. My parents and I came to an agreement that the figure I saved in this ISA would be honoured by them helping to top up by deposit, but with my own saved money going towards The House fees.
Gift from family
Finally, I couldn’t end this post without noting that I received a generous gift towards my deposit from family. My Granny left me a small amount from her ‘estate’ when she passed away and stated that it was solely to be used towards a deposit of a house.
My parents also gave me a small amount that they’ve saved in nominal amounts since I was born. This gift then made up about 25% of my final deposit which I’m eternally grateful for, particularly as I’d already hit my own ideal deposit amount before they gifted money to me.
I hope you’ve found this post insightful. If you have any questions about saving for a deposit or would like to know any finer details, feel free to drop me an email.