Saving a Deposit

How to save that eye watering #deposit to get you on the #propertyladder and all the other things that you will need to know... I wrote this in 2021 and the core themes are still relevant but since writing this, the economic landscape has changed dramatically.

The Deposit

Believe it or not, this is the final piece of the puzzle when it comes to buying a house (see my previous blog post "How to get on the property ladder") but it takes years, even decades to build up a decent enough deposit depending on your income and outgoings so it's best to get started as early as possible. My savings technique was to try and save £200 every month since I was 23. So nearly £2.5k/year right there. Sounds easy but I know it isn't always possible. Some months I couldn't save anything whilst others I could save a bit more.

I kept track of every penny I spent, which was easy as it was all on my credit card statement. Back in those days the banks didn't have the fancy pie charts on your online banking monitoring where you spent your money each month. So I did this myself in excel but I'd definitely recommend seeing what budgeting tools your bank has to offer as it will be far more advanced than what I used at the time! I could see straight away if I had been a bit frivolous on a night out or had a bit of a shopping spree. It kept me in check and on track. I also made a promise to myself that any bonuses would be paid straight into my ISA. I've only ever had 3 bonus payments in my life, 2 of which were £500 so it didn't make a huge difference but it certainly helped, especially when there have been months when I couldn't hit my £200 savings target.

“... it takes years, even decades to build up a decent enough deposit depending on your income and outgoings so it's best to get started as early as possible.”

Of course, as I got older my salary increased (ever so slightly). My salary has always been below the average in the UK but I found a cheap place to rent in Clapham for £375 a month including bills... I don't know how I did that in all honesty. It was luck more than anything as I was on £18k a year at the time and couldn't afford to live in London where I worked... until my sister's friend's sister (sorry for the tenuous link!) needed a flatmate for a room which was £375. The flat was a bit of a dive, I tried to make it pretty with throws and cushions so it was liveable but when chicken bits come up the drainage hole in your bathtub on a regular basis it's a sharp reminder that you live in a bit of a dive. The chicken bits were nothing to do with us by the way. The children in the flat above had a habit of flooding their bathroom so that water gushed through our ceiling once every few months so I've always assumed that they also stuffed food down the drains and those grim bits gradually made their way down to our flat.

Anyway I digress! I just wanted to give you a little flavour of the sort of financial situation I was in whilst I was saving money for my deposit. I didn't have things handed to me; I had to work hard and budget hard, which doesn't by any means mean that I didn't do anything fun. I still went out to clubs (what are those again?!) and dinner with my friends. I was just very careful about how often I did these things and monitored how much I spent to keep track.

It takes two baby

I literally sang those words as I typed them... "it takes two bab-eh-eh-eh, it takes two bab-eh-eh-eh, me and you!" Sorry, enough of that...

So you have a deposit but what next? Saving £200 a month between the ages of 23-29 equates to £16,800. Luckily for me (or not so lucky depending on what element I'm thinking about at the time, those chicken bits still make me squirm thinking about them) I continued to rent that cheap room for £375 for quite a few years and slowly moved into slightly nicer rooms in the same flat for slightly more money... but my salary had increased so I was able to save more than £200 each month. Then I met my husband-to-be, and we rented a flat together for more money than I had spent on rent before but my salary was also higher; so I could still save more than I was before. What was even better, was that he was saving too.

“...buying with siblings... make sure that you're both clear on the percentages.”

Unfortunately, that's the crux of the matter. Nowadays, depending on where and what sort of property you want to buy, it's likely that you'll need help. Some people buy with siblings, I think this would have been a great option for me had both my brother and sister not been quite so many years older than me and already settled. They both managed to buy on their own (again, they're a bit older so got on the property ladder at really good times) so they didn't need me. That would be the danger of buying with siblings, there will always be an older sibling who is more likely to be in a stronger financial position, so things aren't really 50/50. If you do go down this route, just make sure that you're both clear on the percentages. If one is footing 70% of the deposit, then they should cover 70% of the mortgage payments and that should match the deed. Otherwise you could open yourself up to some arguments in the future when it comes to selling and splitting the money, which will ALWAYS happen with siblings. As soon as one sibling finds their future spouse or life-partner, well then it's inevitable that they will want to build their lives together and will need the money from the property to buy one themselves. Being smart from the offset means that you should be able to keep the division of assets pretty amicable. No one wants to fall out with family over money.

It's becoming more and more frequent for #firsttimebuyer to buy together. It makes sense, 2 small deposits make one big one! Not only that, 2 salaries means that you can borrow more from the lender. Some would argue that buying a house together is a bigger commitment than getting married, so just make sure that you're both on the same page, wanting the same things and more importantly, have a really good feeling about buying your first house together before you commit. If you don't even question it then you're off to a great start!

It takes another two baby

I didn't sing this time, too many syllables!

Parents... the next big thing in property buying. We were incredibly lucky that our parents didn't need to chip in to help with the deposit. Having said that, we had miscalculated some of our stamp duty, surveyor and lawyer fees (we were newbies after all!) so ended up needing a little help to fill the gap here. The amount was small so it didn't worry the mortgage provider but this is something to be aware of as I have heard of sales not going through or at least being delayed because gifted money had not been declared properly.

“As part of the mortgage process, you need to show ALL bank statements and prove how you got your deposit.”

If you find yourselves needing a little help from mum & dad then you must declare it. Not doing so puts the whole process at risk of falling through. As part of the mortgage process, you need to show ALL bank statements and prove how you got your deposit. It makes sense when you think about it. They want to make sure that they're not lending to money launderers among other things. Simple. So don't give them a reason to be concerned by seeing a large some of money suddenly appear in your bank account without an explanation.

Sorry to end this blog post on such a serious note! That wasn't my intention. Buying a house is such an exciting time but there are plenty of rules to follow. As long as you're relatively clued up (no one is completely clued up don't worry!) then you will be fine.

If you're interested in more, this is in fact the follow on from my previous blog post "How to get on the property ladder"

Lucy's Hillside House | Content Creator & Blogger