If you’re saving for a house as a first-time buyer, then what I’m about to tell you might be news. Or it might be very obvious depending on how deep you are into your research.
It took me far too long to discover the number one thing I needed to know about saving for a deposit. None of the articles I devoured about how to buy a house in the UK for the first time mentioned this kicker.
It still makes my blood boil when I see anything that tells readers they only need a 5 or 10% deposit. Or a deposit that matches the national average. Or the average for London etc etc. Regularly none of these mention one absolutely crucial thing. Even my own family didn’t take this “secret” into account. I’ll forgive them since property has changed a lot since they last bought decades ago.
Here’s what I’ve covered below:
Why The Big Secret About Saving For A House
What We Can Do To Afford A House
Buying With Others
The Good News About Saving For A House
Other Things No One Tells You
The number one thing no one tells us about saving for a house? We can only borrow as much as the bank wants to lend someone on our salary.
That’s besides other factors to consider when buying a house like your credit score and any debts you may have…! There was little ol’ me thinking I can save 5%, maybe even 10% of the asking price on my low salary…
It sounds so naive, but I had zero education at school about mortgages. How about you? We have to find these things out somehow, but a lot of the information around property is frustratingly obscure. We need to stop writing about averages for starters. We’re people, not averages.
I wanted to buy close to ageing family where I grew up in the Southeast. Have you ever peeked at this region’s property prices? Then you’ll know a mortgage of £90k and below won’t go very far with a 5% deposit. You might be able to buy someone’s garage for that price.
This doesn’t make it impossible to get on the property ladder in the South on one salary. (I suspect we should start calling it a property bridge though. I think more of us will improve our existing home rather than spend even more on moving).
Being penalised for your salary regardless of frugality doesn’t make it quick, or always easy, to save more than ever. But it is possible. You don’t have to a be a unicorn, but you can also forget about averages.
Why The Big Secret About Saving For A House
At first, I thought it was just developers and editors writing about new builds that liked to ignore income. As if your salary is Voldemort, and they already know you can’t afford what they’re promoting.
However, it mentions nowhere on this page from the Money Advice Service that saving for a deposit should include what a bank would lend on your salary. It’s completely missing from step one.
Feel free to politely comment if they update this page to say otherwise (or email me).
If you have a newspaper in the house, crack the property pages. See if you can find any mention that first-time buyers should consider income.
To their credit, the Money Advice Service does have this calculator if you’re thinking “How can I afford a house?” It baffles me that they would only emphasise here how important income and outgoings are to the mortgage provider. Why not mention it as a factor in saving for a house on the relevant page?
When I want to know how to save for a deposit, this should relate to how much I can borrow. For some reason the two topics appear like divorcees everywhere I turn.
So why is everyone so hush hush about one of the most important considerations when buying a house?
Life is marketed to the rich…and debt lovers
I think income gets omitted as a factor to consider when buying a house for a few reasons. For one, writers are mostly in promotion mode with schemes like Help to Buy. They reserve their word count for making these initiatives seem like a solution for all. Journalists and copywriters don’t include that one downer paragraph that highlights who it ISN’T for.
If we ask why is buying a house so hard, the answer isn’t really the financial legwork. It’s the way house buying is marketed.
There might also be another assumption from money and property writers. Perhaps if you were on a low five figure salary like me and planning to buy alone, they think you…well, shouldn’t be planning to do anything! I’ve never really understood the word “can’t” though.
Everything is relative
I also think people simply forget that a whole section of the population are confronted with houses starting at £200k locally. This is unless they want to move over an hour away. This isn’t just in London, where everyone accepts that buying is a steeper climb than anywhere else.
I expanded my property search to the next town and the next town. I finally found a property in my budget… 60 miles away. I concluded that a 5, 10, or even 20% deposit wasn’t enough. Not unless I wanted to completely strand myself from friends, family, and work. (It was also not a safe location; I’d rented near there before and knew I didn’t want to go back. Go figure that property is “affordable” there).
I needed to earn more and save more. Also I needed to find a property that would allow my deposit and mortgage offer to finally meet.
It’s hard to un-know something once you know it
We forget what it’s like to be at the start of the learning curve. I did a lot of research while saving. I was trying to understand how mortgages worked and what I needed on my checklist for buying a first home.
This all seems so simple now, and it’s easy to forget what it was like to be in the dark. I started the blog to help with everything you need to know to buy your first house.
What Can We Do to Afford a House?
I’m not a broker or financial advisor, but I have experience with all of the suggestions below. They might sound easier said then done, but I was able to action all of these.
Starting today we can:
Increase our income through side hustles and pay rises.
Make our money work harder through savvy spending on essentials.
I’ll be writing a lot about value for money going forward. Join the mailing list to keep up and get ideas on this straight to your inbox. I have some recommended posts below that should help, but they’re all over 5000 words. If you haven’t time to delve into what you need to read now, subscribe to return easily later.
We can also:
- Earn as much interest as possible on what we save.
- Consider all the alternatives when it comes to location (try this: The UK’s Best Place to Live).
- Think hard about the minimum we need from a property to call it home. Think again.
- Look at the calendar and realise days are passing just fine. We are playing the long game. Slow and steady can win the day.
If you want more punch from your pounds and the nitty gritty on how to save for a house in the UK then read this:
I’ve written here too about how to bring a mortgage offer closer: What You Need to Get the Best Mortgage Offer.
If you want a more drastic savings boost then you might need an extreme challenge, or an approach from this post:
Epic Ways to Save for a House.
If you know someone with money, then there’s the small possibility of arranging a private mortgage. They’d have to like you a lot though as they could probably earn far more in the stock market. To charge you that kind of interest rate would likely make it not viable for you…
For them to charge you a lower interest rate that you can actually afford means they’d have to be comfortable getting less return than they would elsewhere. I’ve heard a financial advisor say avoid private mortgages because it doesn’t represent the best value for the lender.
What about buying with significant others?
The other frequent omission is that buying on two salaries doesn’t mean you can borrow twice as much as on one salary. It will increase the mortgage offer, so two salaries can be better than one. It’s not the rocket fuel that some of us might expect though. There’s an argument for having your own asset and separate finances from a partner anyway, at whatever stage of life.
The Good News About Saving For A House
I insist on finding the silver lining when maths rains on my parade. One of the main things to consider when buying a house is the potential cost over the lifetime of the mortgage.
The good news about saving such a large deposit is that you’ll owe the bank less over 25 or 35 years than someone with only a 5-20% deposit.
It did mean for me embarking on a savings plan that could have lasted up to 10 years easily. However, renting and saving during that time cost me less than the extra interest would have on a larger mortgage. (If the bank would have let me have a mortgage at that stage).
A large deposit means preferable interest rates when you do finally get a mortgage also. The bank and I disagree big time on what I can afford. I proved myself capable of saving 50% of my salary. This means I’m much more likely to be mortgage free before any of my peers with bigger mortgages.
If we view opportunities as curses, then we shall be cursed.
How to know when to buy a house
It’s not just a question of when a mortgage lender will consider us. Some of us would be surprised how soon we can borrow. Some of us would get a nasty shock upon rejection. If you’re leaving the decision to the banks, then a broker is the safest way to discover if you’re persona non grata.
You can put yourself at a financial advantage with your own timing though.
You’re looking for the sweet spot where a mortgage with interest for the next 25 years would cost less than renting over that time. Obviously this principle assumes that you couldn’t rent for less or live for free during this time.
No one knows what the next 25 years holds for them exactly. But what if the maths says a mortgage with interest would be cheaper than renting for the same time span? And you also pay your mortgage off early? Then you’ll have spent even less than projected on housing.
A sentence of renting and saving for five years or more might not sound like good news. Life is what we make it though. I’d rather look for alternatives, or get cracking today on a long-term goal. Why waste that time feeling like the odds are against us while saving nothing? Too many of us are convinced it’s futile before even beginning.
If we feel like we’re chasing ever rising property prices, then remember that prices can also take substantial dips. No one knows where the economy will be two years or ten years from now.
If you can’t buy today, then you can’t buy today. Don’t kill your dream just because the goalposts might move. There are any number of variables that will bring your goal closer to you instead. Most of these are within your control.
Don’t obsess about things that you CAN’T control.
I’ll be doing a post about how I ended up buying slightly underbudget(!) Join the mailing list at the bottom of this page if you want to know when that gets published.
Other Things No One Tells You
Here are some other pointers to include on your buying a house checklist in the UK:
- You can ask the seller almost anything. If the agent advises not to communicate with the sellers directly, this is normal. Don’t be afraid though to put questions to them via the agent and your solicitor. (Also let the solicitor know anything the estate agent relays to you in case it affects the purchase).
- It’s nearly always worth buying near decent schools even if you don’t have kids or want kids. If you sell in future, this might be an important factor for a buyer.
- If you plan any renovations, get builders quotes before exchange. You might change your mind once you discover the cost of any work you can’t do yourself.
- Applying for mortgages via a broker lowers the chances of rejection
- Everything takes longer than expected. If someone gives you a six week timeframe, amend it to eight weeks mentally. Prepare for it to change again.
- It’s possible to buy a house privately. If you see a house you like the look of on the outside, approach the owner. Find out if they’ve thought about selling. Or you can flyer letterboxes in your chosen location with the sort of property you’re looking for.
You’ll also want to know How to Choose a Conveyancer Or Solicitor You Don’t Hate.
Things to consider once you’ve bought a house
Continue saving any way you can once your purchase is complete. Everyone needs a rainy day fund.
You don’t have to furnish or redecorate the same day that you get your keys. Or that week, month, or even during your first year. Earn interest on your money instead, and find out how you really use the space by living in it first. Then when you’re ready for improvements, you’ll have the funds, but can also spend those funds more wisely on making changes that really benefit your lifestyle.
A house is not always an investment. Weigh that up with other investment options like stocks and shares. More on that here:
How hard is it to buy a house for the first time?
Honestly, getting information about the housebuying steps was trickier than wrangling my finances. When you’re researching the process online, I’d ask the same question as when looking at property listings. What are they not mentioning? That will give you a clue as to things to know before buying a house.
The next time you’re reading some magic about how to save for a house deposit in a year, see if they mention income. Be aware that it is possible to save a deposit in a year…but it might not be your deposit! It might be the deposit of someone on two incomes in the north towards a three bedroom house for £150k. (In my childhood village, you’ll be very lucky to find a three bedroom house for even £300k).
The number one thing no one tells you about saving for a house…
…might actually be that it’s within reach for more of us if we change our behaviour. Too much of the news about the property market is defeatist. It attributes all the power to external factors like inflation.
Don’t worry about why this is, but focus on what you can do to afford a house like:
- Putting your skills towards earning more
- Demanding better value from your spending
- Making sure any savings are earning the best interest
- Tweaking your location choice and property wish list
- Discussing alternatives with loved ones
- Learning zen-like patience
If you on track to saving a 25% deposit or more, then look forward to owing the bank less interest than most your neighbours once you’ve bought.
Let me know in the comments where you in your savings journey, and how you plan to save your deposit if you know where to start. For anything else you might need to know before buying your first house, stick with the mailing list. Subscribe to catch an upcoming post about refurbishing a fixer upper that includes what to look for when buying a house.