With the cost of renting almost the same as paying a mortgage it can be an uphill struggle to save the deposit you need to get a foot on the property ladder.
We look at how you can avoid falling into the rent trap and get back on track towards buying your own home.
It’s likely that renting your own place is leaving you with very little spare money to save for a deposit.
It’s worth thinking about whether you could survive without your own space for a short time, even 6 – 12 months, because this could make a big difference to your house fund.
There are a couple of options you can consider:
While this may not be a viable option for everyone, moving home to live with Mum and Dad for a little while will be much cheaper than renting your own place.
While returning home is likely to feel less than ideal, the short-term sacrifice will give you the chance to significantly increase the amount you’re saving. If you live near your childhood home, get along well with your parents and they have the space to put you up it’s worth discussing with them.
You’ll need to talk about how long you’ll stay, how much you’ll pay in rent, what you’ll do to help with house-chores and how you’ll divide household bills up front so everyone is happy with the arrangement from the word go.
If you have friends that have a spare room to let (whether they own their property or are renting) it’s worth looking at living with them for a little while.
If not, then there’s likely to be a myriad of house shares available in your local area and with a little searching you should be able to find some nice people to live with.
Moving into a shared house will most likely be cheaper than renting alone, giving you the chance to save up for a place of your own.
While living with others is likely to be testing at times, it can also be great fun; you’ll just need to make sure that you don’t spend all the money you’re saving socialising!
If you live alone and have the space, taking in a lodger can be a great way to help subsidise the cost of renting and give you extra money to save for a deposit.
Before you begin your search for a new flatmate you will need to check that your landlord is happy for you to share your property and sub-let a room.
They may decide to advertise the room directly and lower your rent in return, or agree to let you find a tenant in exchange for a higher combined rent from you and your new lodger – either way it’ll save you money for your house deposit (you’ll be able to split the cost of council tax too).
The easiest way to find a lodger you can trust is by speaking to friends, family, or if you’re in a steady relationship talking about moving in with your partner.
If that’s not an option there are a plenty of websites which allow you to advertise for free or a small charge for a tenant.
Paying less rent is a great way to free up more cash for your deposit fund – here are some achievable ways to reduce your rent.
If you can make do with a smaller home for a short period, moving to a smaller place in a cheaper area could help bring you one step closer to getting your own place.
Weigh up how many bedrooms you can manage with and if there is a cheaper area closer to work so you can save on commuting costs.
Downsizing could also mean you save money on heating, council tax and other household bills, meaning you can put even more money in your deposit fund.
If you don’t fancy downsizing then going to the other extreme and moving into a listed building could be an exciting way to save money!
An alternative to renting while you save for a deposit is to become a Live-In-Guardian at one of the UK’s many listed buildings – you could even find yourself living in a Castle or Stately Home!
As a Live-in-Guardian you’d be responsible for keeping an eye on a listed property to ensure it doesn’t’ fall into disrepair.
However, the responsibility can be worthwhile as rent from most Live-in-Guardians is very cheap or even free so you could save a packet on your living costs.
While becoming a Live-in-Guardian isn’t right for everyone, if there’s a suitable property in your area it could be an ideal solution.
Visit the Camelot website for more information on becoming a Live-in-Guardian and to look for properties in your area.
Getting a little help with your deposit can make buying a property more realistic. There are a number of ways to do this:
If you’re a first time buyer or work in a certain profession then you might be able to take advantage of one of the government ‘affordable housing’ schemes to get a foot on the property ladder.
First Buy is a government backed scheme that loans first time buyers up to 20% of the price of a new home, so you’d only need to find a 5% deposit before you could buy.
Most First Buy loans are only available on new build properties which does limit your choice, but given they’re only repayable when you sell your home this scheme could prove to be the answer if you want to own your own property but are struggling to save enough cash for a larger deposit.
New Buy is a similar scheme offered by lenders and home builders in England on new properties, offering mortgages for buyers only with a 5-10% deposit.
Asking your parents for a loan isn’t a feasible option for everyone, but if you’re parents are willing and able, borrowing some money to help with a deposit could enable you to buy your own home months or even years earlier than you’d otherwise be able to.
Of course given the sums involved you would need to sit down with your parents to discuss how much you would pay back each month and if they would charge any interest to cover the cost of the loan.
Remember, you would need to be able to afford your new mortgage and repayments on any loan so you need to make sure you’re not stretching you budget to breaking point or leaving your parents in the lurch financially.
If borrowing from your parents is an unfeasible option, there are a number of mortgages on the market that allow parents (or anyone else willing) to help you buy a property without having to stump up a cash lump sum.
Getting someone to become a guarantor is a big ask as it usually involves using their home as security for your mortgage or placing a hefty amount of savings in an account that’s associated with your mortgage for a set period.
Both options could help you overcome the struggle of saving for a deposit, but you and your parents would need to carefully check the terms of each deal before signing up.
You can find a selection of first time buyer deals in our First Time Buyer mortgage table.
If finding money for a deposit is holding you back from buying a property you may find a shared ownership home is a more affordable alternative.
Although you wouldn’t own 100% of your home right away, it would still mean you have one foot on the coveted property ladder.
Shared ownership and shared equity schemes involve purchasing part of a property and renting the rest.
You will still need a deposit to get a mortgage for a part buy property – but as you would only need to borrow 25%, 50% or 75% of the property value, the amount you will need to save will also be much smaller.
For example: to get a 90% mortgage on a 50% share of a £150,000 property you would only need to find a £7,500 deposit, rather than the £15,000 you’d need to buy it outright.
For more information on purchasing a part-buy property, read our guide: Could a Shared Ownership Scheme Help You Buy a House?
Ok, while it’s easy to label budgeting as the solution to all financial problems, taking the time to set out clearly what you earn and the cost of all your regular outgoings could help you find areas to cut back and save more money towards a deposit.
The key to a healthy budget is to be sensible in you estimates and to factor in a certain amount of le-way to cover unexpected costs, for example car repairs or having to replace household items like your vacuum cleaner or microwave.
If you’re serious about saving for a property then you’ll need to be willing to a make a few sacrifices with your social life.
This doesn’t mean living life like a hobbit for 12 months but rather making decisions with your budget in mind, inviting friends for supper instead of eating out, or renting a movie rather than heading to the cinema for example.
For a step by step guide on drawing up an effective budget and for help on sticking to it, try following our Action Plan: How to stick to a budget.
Saving for a deposit will be a lot easier if you get a helping hand from your savings account.
After all, given the large sum of cash you will need to set aside, getting a good interest rate could go a big way to helping you reach your goal faster.
Picking the best account will depend on how you plan to save, if you want to set aside a regular amount each month a regular savings account could be the best option, equally if you need greater flexibility you might need to plump for an instant access savings account.
As well as finding the right type of savings account, paying less tax on your savings is also a must. Using your full ISA allowance each year means you get to keep all the interest your savings earn, rather than handing a cut to the taxman.
Getting the best interest rate could also mean you get your hands on your house keys quicker!
For help choosing the right ISA or savings account try following our Action Plan: How to grow your savings.
I am currently in the process of purchasing a property and my partner is selling one. My partners parents have agreed to pay the deposit on the new property until my partners property sells, but having spoken to the solicitor dealing with the purchase they have said that my partners parents must instruct a solicitor in order to pay the deposit which could potentially cost hundreds of pounds..... I just assumed that they would pay the 10k into our bank account and i in turn would use it to pay the deposit. Any advice on this would be much appreciated.