In this brief guide, we are going to discuss “how to save for a house deposit in a year”.

Saving for a house deposit is really hard, research shows that it takes a couple around 3.5 years to save the average house deposit and a single person around 13 years.

How to save for a house deposit in a year?

Saving for a house deposit in a year is going to be very hard but there are clear steps which you could take to get you closer to the target

Steps to start saving for a house deposit in a year

  • Calculate your likely mortgage deposit
  • Calculate your monthly disposable income
  • Get a second job
  • Cut down on your expenses
  • Start a budget
  • Collect vouchers
  • Shop at cashback merchants
  • Get a cashback credit card
  • Build your credit score
  • Sell your assets e.g cars, jewellery
  • Get a gifted deposit from your family
  • Get a Government schemes
  • Get a co-buyer
  • Calculate your likely mortgage deposit

If you want to save a for a house deposit in a year then the first thing you will want to know is how much your mortgage deposit is likely to be. 

Without knowing this it will be hard for you to know how much you need to save within a year.

For you to know how much mortgage deposit you will need to save you should first decide on if you are buying a residential home or a buy to let home.

The mortgage deposit for a residential home will be around 5% of the purchase price and the mortgage deposit percentile for the buy to let property will be around 20%.

Decide on what the maximum you will pay for the property is and then use the percentiles above to decide what your mortgage deposit will need to be. This is the first amount you must save but not everything you will need to save.

E.g if your budget is £500,000 and the property you want to buy is a residential property then you will need to save at least 5% for your mortgage deposit which is £25,000.

The next obvious question is can you save at least £25,000 for your mortgage deposit within a year.

If your answer is yes then carry on if your answer is no then you may need to reconsider if it is possible to save for a house deposit within a year.

Don’t forget a house deposit is not the only cost you will need to pay for when buying a house, other costs include:

  • The stamp duty costs
  • The home insurance
  • The council tax
  • Renovation costs
  • Utility costs such as water gas and electric.

Calculate your monthly disposable income

The next obvious thing you will want to do is calculate what your monthly disposable income per month currently is and by how much you will need to increase that in order to be able to afford the mortgage deposit you need to save.

To calculate what your monthly disposable income is, add up all your income and then subtract it from all your monthly expenses. 

Whatever is left is your monthly disposable income and this is how much you will need t put away to save for a house deposit within a year.

To find out the difference you will need to make up each month or how much extra you need to save each month simply subtract your current savings from your mortgage deposit requirement and then divide this by twelve months tocome up with what you need to save each month.

The difference between what you need to save each month and what your monthly disposable income is what you need to save up so you can afford your house deposit within a year.

Get a second job

The next thing you will need to do is get a second job if your monthly disposable come will not be enough to save for a house deposit in a year.

You should ensure that your second job provides you with enough monthly disposable income to cover the shortfall which you have each month and if it doesn’t then you may very well need to get a third job.

There are a lot of part-time jobs you could take which could provide you sufficient time to save a house deposit in a year but most of these jobs will put a big strain on your health and how much sleep you get each day.

Cut down on your expenses

If you want to save for a house deposit within the year then an obvious thing which you should do is cut down on your monthly expenses and this will increase your monthly disposable income.

You can cut down on lifestyle expenses such as going to the gym, going on holiday eating out etc.

These could save you a big chunk of money which you can put towards your house deposit.

Research  shows that on average 26-30 year olds spend £66 on a night out, and that 40% of young drinkers go out at least once a week.

This means you could be spending as much as £350 eahc month and over £2,500na year.

Not going out could save you this money to ut towards your house deposit.

Another big expense which cuts into kost peoples ability to save for a house deposit is going on holiays.

Reearch from Lloyds banm shows the average adult spend about 1400 on a holiday nd usually spends 17% more than they anticipated once theyb arrive at their destination.

Start a budget

Once you have analysed how much you will need to save each month and how much extra you need to earn each month you will then need to start a strict budget to ensure you keep to your monthly expenses and spend only as much as you need.

Collect vouchers

If you want to save for a house deposit ina year then you may want to further cut down on your expenses by collecting vouchers which you can use to save money on any purchases you make.

Shop at cashback merchants

Another way to save money and cut down on your monthly expenses if you want to save a house deposit in a year is to shop at merchants who offer cashback for any purchases.

 This could greatly increase your monthly disposable income.

Get a cashback credit card

Another way you can increase your monthly disposable income and save for a house deposit in a year is to get a cashback credit card which allows you to receive cash back when you use the card or with certain merchants.

This could increase your monthly disposable income and hence the amount of money you have to put towards your house deposit.

Build your credit score

If you want to sve for a house deposit in a year then you shoild be very cosnscious of your credit score and how this could potentially affect your eligiblity for a mortgage if you plann to use a mortgage to purchase your home.

Your credit score is one of the factors mortgage lenders use to determine your creditworthiness and subsequently your mortgage affordability.

What is your credit score & history?

Your credit score and history is a reprot which displays your credit behavour for a set period of time. In the UK your credit score displays your credit behaviour for the past 6 years.

Your credit score will contain information supplied to the credit bureuas (usually on a monthly basis) by credit providers and utility providers which you have agreements with.

Your credit reportt may also contain rent reporting data.

Your credit score will also contain data such as:

  • If you are registered in the ecltoral roll and at what adress
  • All credit accounts you have had within the last 6 years. Open and closed accounts
  • All public court records which may affect your ceditworthiness such as the country court records, the banlruptcy records
  • Your credit report may also contain information from organisations such as CIFAS.

How to build your credit score and history

Pay your bills on time and in full

-Expand your credit. The more types of credit you have which are all paid on time the better your score.

-Register to vote on your main home address

-If you rent and pay your rent on time, then report this to the credit bureaus.

-Ask for a credit limit increase

-Check your credit report for any errors

-Don’t close or cancel Bank accounts or credit cards. The longer you have these open, the better.

-Use only 30% of your available credit such as overdraft or credit cards. This shows that you are not too dependent on credit

-Do not make too many credit applications within 3 months. 1 every 3 months is is acceptable.

-Avoid getting rejected for credit and only make applications where you have a 95% chance of approval or are pre-approved.

-Avoid adverse credit such as payday loans

-Avoid maxing out your credit card or going over your limit as it makes you seem dependent on credit. You might also incur a few fees from your credit card provider.

-Ensure you do not default on any repayments-, even if this is not credit as you can still have negative marks due to owing people or companies from things such as county court judgements, Bankruptcy or Individual voluntary agreements.

Always inform your credit provider if you are having difficulty and they could work something out with you rather than selling your debt to a collection agency which will cost you more

Sell your assets e.g cars, jewellery

If you have any assets such as painting, cars, watches etc then you may want to sell this except they are essential for you to make an income each month.

Selling your assets could give you more money to put towards your house deposit and therefore make it more possible that you are able to save a house deposit in a year.

Get a gifted deposit from your family

Another thing you can do to save a house deposit in a year is to get a gifted mortgage deposit from your family or friends.

There are now a lot o mortgage lenders who accept gifted deposit although most will insist you use a gifted deposit letter which makes it clear that the person gifting you the house deposit does not have any claim over the property as it is a gift and not a loan.

Get a Government scheme

There are a variety of government schemes which may be able to help you save for a house depsit in a year.

In some cases, these first-time buyer government schemes will reduce the amount of the property price and thereby increasing the amount of mortgage deposit you have in relation to the property value.

These schemes include:

Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.

Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.

Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.

Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.

Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.

Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.

Right to buy– allows you to buy your home at a discount price.

Preserved right to buy- same as above.

Right to acquire- same as above.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

Use a mortgage broker to buy a house

Once you have saved for your house deposit within a year you may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we are going to discuss “how to save for a house deposit in a year”.

If you have any questions or comments please let us know

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.