How to save for a house while renting
How to save for a house while renting. Top tips to save money to buy a house plus advanced mortgage calculator to know exactly the monthly and weekly expenses that you need to pay. Best ways to save for a house deposit.
Having your own is great. There is so much more freedom for you if you are living in your own house compared to when you renting.
But, of course, real estate is not something that can be afforded on the spur of the moment. You must save money to buy a house if you want your own.
Buying a house while renting is extremely challenging, but not impossible if you make a plan and stick with it. According to this article from The Time, someone needs at least 10 years to save money for a house deposit and sometimes even longer if you live in London.
These figures can be slashed down if you follow the tips that we listed further in this article and will dramatically help to save money for a house deposit while renting.
Before we move to the best ways to save for a house deposit, let’s see the advantages and disadvantages of buying a property.
While the first thought of owning a house sounds great there are overwhelmingly things to consider and here are some of the most important ones:
First of all saving and buying a house with a mortgage require big commitment and you will be responsible for monthly payments regardless of having an income or not.
Second, once you buy a house you will be tied up to the same location for as long as you decide to sell the house and usually is a very long process.
You are responsible for repairing and fixing any damage that occurs to your property. That shouldn’t be a problem if you like to get your hands dirty and have a passion for DIY.
When having a mortgage, the financial stress will become imminent, whether you like it or not. Even if you have a good source of income the financial stress is dominant especially when we go through uncertain moments like pandemic financial crisis which started in 2020 and continues even today.
The financial freedom to spend on likes will be a thing of the past. Just as any mortgage owners, you will most likely save every extra money to pay towards to your mortgage.
I’m not saying that you won’t have to go out for a dinner, or that you have to wear dated clothes. Certainly, you will need to watch your finances carefully and check every month the online mortgage calculator to estimate what’s left to pay from the total mortgage.
By using an online mortgage calculator, is easier to evaluate your finances for the future ahead.
Now that we made clear what responsibilities are when buying a house, let’s encourage you a bit by listing some of the benefits of owning a house over renting:
Owning a house is probably everyone’s dream. Is in our nature to have our own place where we feel safe and build a family.
While some people prefer to rent vs. buying, in the long run, and after using an online calculator to determine the costs, you will quickly realize that you wasting money.
After renting for a few years now, I come to the conclusion that so far I just flushed money on the toilet. If I was getting a mortgage 8 years ago when I moved to UK, right now I could have half of the mortgage paid.
A strong reason that hold me from getting a mortgage is that I couldn’t make my mind up if I want to settle in UK forever. I’m sure many other people are in my position.
If you are like me and don’t know if the country you live is where you want to see yourself in the future, just get a mortgage if your finances allow you to, and sell the house in the future.
At least you will have a big chunk of the mortgage paid and eventually, you can make even some extra money, considering that the house prices are rapidly rising.
Having a mortgage is similar to getting a car leasing, exception makes that the car is losing the value every year, while the property that you buy is growing in value each year.
Another benefit of having a mortgage is that time is moving rapidly and before you know it your mortgage will be paid off. If we take into account how much money you pay every month when renting, is a total waste, since you won’t own anything after 20-30 years.
Speaking of affordability, in UK there are many scheme’s that help you to buy a house while renting, even with a minimum deposit of £5000. The more deposit you have, the smaller your monthly mortgage will be. You can read more about help to buy house schemes in the UK on this gov website.
Now let’s get back to the priceless tips of how to buy a house while renting. The following tips can be applied anywhere you live, so feel free to take notes and share this article on social media to remember later on.
Cut down on unnecessities
A few things that you don’t necessarily need are luxury fashion items, or luxury furniture and home decor. Luxuries are not something that you should buy when you are on rented property.
Some landlords allow their homes to be modified by the tenants, as long as they are willing to pay. But then, why would you want to modify a temporary house which you don’t own?
Stop trying to buy luxuries that you are going to waste on your temporary home. Chances are that you won’t even need them in your new house. These luxuries can include new sofas, TV systems, tiles & so on. You can invest on these after you have moved into your own new house.
Make a separate account
Make a separate bank account and deposit regular payments on each paycheck. This account will be used to save up for your house. This will require a lot of emotional strength, as you will have to refrain from taking even a penny out from this account until you have enough for a house.
As is the saying in the East that drop by drop makes a lake, any amount you deposit from each paycheck is enough as long as you don’t skip out on making payments.
By sticking to this routine, you will already make a habit to make a payment each month, just as you would do when having a mortgage.
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Refrain from mindless shopping
Okay, this one is probably the hardest tip to ever give to someone else. We all spend a dozen of money on online shopping, or on items we all know that we are just going to waste around here and there.
No matter what you do, don’t listen to the ego that’s telling you that you need that useless product. Trust me, you will feel so proud knowing that you can control your spending habits.
A good way to refrain from mindless shopping is to delete all online shopping applications from your mobile phone, and stop using social media as much. I’ve made a post specifically to help you get your finances in order and save plenty of money which can apply even when planning to buy a house.
Save as soon as you get paid
Instead of waiting until the end of the month to see what money you have left, make a good habit to move money into a saving account immediately after you get paid.
Take advantage of online banking and by tapping a few clicks you will safely transfer money into your savings from the comfort of your own home. If you don’t do online banking, make a priority to visit the bank and deposit the money as soon as possible.
Think about that goal that you will achieve. Your future house is depending on how responsible you are with your finances.
Move with your parents or in a smaller house/apartment
A smart move to speed up the process in buying a house is to move back to your parents if you can, or in a smaller house where the rent is minimal.
If you have a full-time job, you probably spend most of the time out anyway. Therefore I don’t see why you should live in a large and expensive rented house. Minimizing the spendings will have a huge impact when saving for a mortgage deposit.
When deciding to rent a cheaper place, lookout out for small apartments with a pay as you go electric and gas meter. Pay as you go electric and gas meters are the cheapest option that will save hundreds a year. You know exactly how much you spend each month and is easier to control the bills.
Do not tell your friends
Okay, trust me on this. Do not tell your friends that you planning to save money to buy a house or the fact that you have another bank account. Without being guilty or selfish, keep this plan for yourself.
There are a few reasons why you shouldn’t tell your friends about your plans.
Your friends might ask to borrow money from you, knowing that you have savings in the bank.
If your friends have no such big plans like yours, they might try to pull you down and convince you that you make a mistake by living a frugal life.
Usually, when we evolve (emotional, intellectual, professional) the others will try to hold you so you don’t leave them behind. Another theory is that people are jealous when others become successful and will do anything to stop them from leaving the crowd.
Take this advice for anything you plan in life. The negative thoughts from others can impact your life. Here I’d like to reminds you of the quote ” Loose lips sink ships”
Downgrade your car or use a bicycle instead
Car is a necessity to move from A to B. Any car make can do that, even the cheapest one. The fuel is not getting any cheaper, on the contrary. Besides fuel, you have the car insurance which is a few hundreds a year, plus tax, M.O.T and any service that occur.
Some people prefer to catch the bus, but I can assure you that driving your own car is a much cheaper option and have more flexibility.
If you want to go extreme and keep yourself fit at the same time, you can use a bicycle for going to work. Riding a bicycle costs you no money, just your body energy and time. All the expenses that a car require can go towards saving for a house deposit, which adds up significantly.
Go on cash
Using cash is more likely to help you reduce all that extra money that you might otherwise spend because you have a card with you. Plus, transaction fees and all that other content might prove to be quite a crater in your pocket.
Going on cash is also a really good idea because you can only fit so much cash in your wallet. Another really genius trick is to use smaller cash notes. The smaller the cash notes, the less total money you can put in your wallet, and lesser likely you are to waste money here and there. Absolutely genius, isn’t it?
Skip out on restaurants and takeaways
For the next few months, you are better off not loving yourself too much. Of course, adoring your own self is something that every psychologist does recommend, but you should also realize that sacrifices must be made in order to gain something in the near future.
This is why you should skip out on restaurants. Restaurants are a great idea if you are looking to save a few bucks or something. Most restaurants’ food isn’t even that good, am I right? You’re just paying for the ambience. Save money, and you will have all that ambience in the comfort of your own home sometime soon enough.
When ordering takeaways it might not feel like you spend a ton of money, but in the long run, is a large amount of money that could be saved if you learn to cook a few basic meals.
Go for canned and frozen food for a while and stop glamorising the pizza and takeaways. They are frozen food thrown in the microwave and served to you nicely packed. I’ve learned that after watching plenty of Gordon Ramsey episodes.
Take micro-jobs to save even more for a house deposit
Micro jobs sometimes are fun and exciting especially if you have some specific skills such as cooking, making crafts, managing social media or creating digital files.
There are many platforms to get micro jobs. Some of the most popular ones are Fiverr, Upwork, Freelancer and Facebook groups.
My favourite platform is Fiverr where I collaborate with a few freelancers who help me with videos for my new YouTube channel. Go ahead and check what kind of video’s I’m paying for so you can sell similar services on Fiverr.
In the last few years, Amazon and food delivery has become the trendiest part-time job and you can do it in your spare time, as many hours as you like. Deliveroo and JustEat are offering flexible options to do as many jobs as you like per day.
You might need to check the requirements for food delivery as you need a driving licence and special insurance, or you can deliver food by bicycle. There are plenty of opportunities to make extra money.
Start an online business to make extra money besides your salary
Having a side hustle proved to be a real help during the lockdown. Anyone who lost their jobs during the pandemic are a great risk of losing their homes if they have mortgage to pay every month.
Diversify your income by starting an online business, be it a blog, a YouTube channel, virtual assistant for social media or sell digital products. If you haven’t got the skills for any of these listed above, you can outsource the content created by others.
Let me make something clear. Most of physical shops are closed down because of pandemic and because the consumers behaviour changed. Having said that, retailers will pour the money towards online advertising more than ever in order to reach potential buyers.
The future looks bright for those who own a platform that could host advertising space ( either a blog, YouTube channel or a social media page).
Advertisers are forced to spend more and pay higher amounts for keeping their brand afloat in the future. Just take a look at Statista.com to convince yourself.
From those money, you too can cash in some cheques if you start to build a blog or a YouTube channel right now. There are many ways to make money from these two options, not just from ads.
Affiliate marketing, sponsored posts and even by selling a blog or a YouTube channel can bring a handsome amount of money in your bank account.
I would really love to know if you found these tips useful and if you have any other ideas, please leave a comment below, it might help other people who want to save money for a house while renting.