How to save for your first home whilst renting…

If you’ve been thinking about buying, why not have a look now?

Small changes in your spending can make a big difference to your savings, when you’re planning to buy your first home.

Here are our tips to make the most of your earnings and take steps towards buying your first home.

The average UK house price has risen astronomically in the last couple of decades. According to the last ONS figures, the average house price has gone up from £60,000 in the 1990s to £288,000 in June 2023.*

The many people, financial independence can be expensive, making it difficult to save money with outgoings like rent, council tax and monthly food bills. For this reason, we want to offer some tips on how to save more money and provide you with an overview of the information needed to save for you first home.

How much do I need for my deposit? 

First of all, have a target in mind. Ideally, buyers should save as much as possible to put towards their first home. However, when trying to balance other outgoings such as rent and bills, it’s important to be realistic. You will need 5-10% of the value of your desired property purchase, so if your dream first home costs £200,000 you will need between £10,000-20,000 to get the ball rolling.

How should I budget for a deposit? 

Set an amount to save each month that you know you can afford and can consistently add to your savings each time you receive your wages. This will help you stay focused and not become overwhelmed or disillusioned. A recognised way to organise your money is 50:30:20.

This refers to dividing your monthly salary into 3 sections; 50% for rent and bills, 30% for spending and 20% for saving. This, of course, will vary from region to region, and what you deem possible on your monthly budget. However, if you’re consistent with this approach over a prolonged period, this can be a highly effective way to save, and you will, slowly but surely, start to see progress in your savings.  

Should I use an app to budget my money?

Using a budgeting app can help you understand your income and spending to have more control over your finances. Many apps can connect with your bank account and credit card accounts to give an overview of transactions and help you organise your budget. 

According to Investopedia, the top budgeting apps available today include You Need a Budget (YNAB), Mint, Simplifi by Quicken, Pocket Guard, Empower and Zeta.*

Should I audit my bank account? 

Once you’ve gotten to grips with your budget, take the time to put your banking under the microscope. Look out for forgotten payments; old subscriptions that you never got around to cancelling or health club memberships that you never use – you might be surprised about what you find. £15 a month might not seem like a lot, but over the course of a year it adds up to £180. Small changes can add up to a big difference. 

What schemes are available for first-time buyers?

Shared Ownership

Shared Ownership is another great option for those trying to get onto the property ladder. This is a Part Buy/Part Rent Government scheme that can make a huge difference to the mortgage rate you can receive on your way to owning a home. 

Homes available with Shared Ownership are often new-build apartments or houses with between 25% and 75% available to buy. All Shared Ownership applicants are obliged to invest in the maximum share possible. This will be assessed via your income and savings which you’ll need to provide along with details of your monthly outgoings. There will also be costs such as legal fees to consider, plus an ongoing rent to the shareholder of your property.   

This option is available in England, Scotland and Wales, though may differ slightly between each region.

First Homes scheme

In England, the Government offers a scheme called First Homes to first-time buyers. There are various eligibility criteria, including that the applicant needs to be over 18, a first-time buyer and be able to get a mortgage for at least half of the price of the home. Additionally, the property has to be advertised as part of the First Homes scheme, and cannot cost more than £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied.*** For more information, visit the website

If you’re interested in finding out more about the different ways of buying a home, read our article here.

Step-by-step guide on how to start saving money for your first home

Sometimes, a plan is what you need to get started and understand how much of your income you should save, so here are some tips you might find helpful:
  1. Record your expenses – Take a month or two to write down what you spend your money on. The budgeting apps mentioned above may also help you keep track. Make sure you include every penny, including fuel, rent, bills, household items, as this will help you create a budget that works.
  2. Create a budget – Now that you have a better overview of your monthly outgoings, you can see where you could perhaps reduce your spending, limit overspending and reallocate these to your savings. Start small and what feels comfortable and manageable, you can always increase it month to month.
  3. Transfer to your savings first – After receiving your pay cheque, transfer the amount you plan to save into your savings account as one of your first payments (after you’ve paid for the essentials, e.g. rent and bills). In this way, you will be less likely to slip into your savings.
  4. Make your savings work for you – Place your saved money into a savings accounts with a higher interest rate, for example, a Lifetime ISA (LISA).
  5. Identify non-essentials – Take a deep dive into your monthly expenses, including recurring charges and subscriptions. Think twice before buying something new, or consider the difference in cost between eating out and cooking at home. Cutting back on non-essential items can help you save more, without diminishing your quality of life too much.
  6. Set a goal – Having a goal to work towards will help you save and give you the motivation and a sense of accomplishment as you reach each milestone towards your final sum.
Every saver’s and home-buyer’s journey will vary, but hopefully these tips will help you get started. If you already feel you’re close to reaching your target, read about the essential steps to buying your first home, here

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