In this brief blog, we are going to discuss how to start saving for a house at 18.

If you are living in the UK, in London or any major city in the world then it is very likely that house prices are rising and you are wondering how to save for a house and if you will be able to afford a house.

How to start saving for a house at 18

To start saving for a house at 18 there are a few things you will need to do. We have listed a few of the main things you need to do to start saving for a house at 18. 

Following these steps will ensure you are in the very best position to buy a house in the years ahead.

Steps to start saving for a house at 18:

  • Calculate your likely mortgage deposit
  • Calculate other costs of homeownership
  • Plan your career path
  • 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
  • Put your money in an ISA or Index fund
  • Keep your eyes on Government schemes
  • Use a property ladder app

Calculate your likely mortgage deposit

The first thing you want to do is now how much the mortgage deposit you will need to put down for your house will be.

If you want to buy a commercial property such as a buy to let investment first then you may need to put down as much as 25% for your mortgage deposit.

If you want to buy a residential property then you may need to put down a mortgage deposit of as little as 5% of the property price.

To calculate what mortgage deposit you may need to put down you should look back at historic price growth in the area you want to buy. How much have property prices grown on average each year?

You should then do a future price forecast by estimating the average price growth each future year in the area you want to buy from.

This will give you an idea of what house prices may be in that area when you are finally ready to buy.

Alternatively, you could simply have a maximum budget you are trying to spend at the time when you are ready and stick to this, regardless of what property prices may be.

This will, of course, mean you are flexible in regards to where you live and the type of property you live in.

Calculate other costs of homeownership

If you want to start saving for a house at the age of 18 then you shoild be aware that there wil be other costs to cater for outside of your mortgage deposit.

If you are in the UK then you will have to pay for stamp duty costs although you may be able to claim from the first-time buyer stamp duty relief if this is still avalable when you are reaydto purchase your home.

The first time buyer stamp duty relief is omly available to firt-time buyers bying a home which is sold at a value less than £500,000. 

Aside from the stamp duty cost which is a legal land tax there may be other similar taxes in other countries e.g the land and buodings transaction tax etc

These costs arent the only costs you shoudl cosnider if you want to start saving for a house at the age of 18.

You should also consider:

  •  the council house tax or any similar costs, 
  • Home improivement costs
  • Hoem renwovationcosts
  • Home insurance costs
  • The costs of utility such as Gas, electtiricty, water and broadband.

Plan your career path

If you want to start saving for a hoiuse at the age of 18 then you mauy want to consider planning your career properly so you are able to afford the house which you want to buy.

A proper carer plan will ensure you have enough earnings at the time when you intend to purchase. 

This means you will need to decide what sort of job you will need to earn the sort of income that is required for the house you need to purchase and this will subsequently influence what degree you choose to purchase at university and what su jects you choose to take prior to university at college level or A-levels if relevant.

Get a second job

If you want to start saving for a hosue from the age of 18 then one of th key things you wil need to do is ensure you have enough income so you canbegin saving for a house immediately.

This means you may need to have two jobs or a part time job which prvides you siufficient income to put away a bit of that each month in a savings account or an appropriate govenrment scheme.

A second job will help you save for a house from the age of 18 and will put you years ahead of your peers who dont.

Cut down on your expenses

Another important thing to do when looking to start saving dfor house fr the ageof 18 is to cut down on yur current expenses.

Cutting down on your expenses will ensure you haveany necessary dosposable income which you cna then ut away in a relevant savings account.

You may choose to cut down on night outs, outings to restaurants or gym memberships and save that money towards your mortgage deposit.

Start a budget

If you want to start saving for a hous at the age of 18 then you should certainly start a strict budget which you will hope to stick to throughout the time it takes you to purchase yourfirst house.

Your duget will ofcours have to be adaptable and change as your annual or monthly income increases and you should cater for this by setting the prjnciples on which your budget is based on e.g saving 30% of your monthly dipsosable income each month.

There are many budgetting tools which allow you to begin saving but none which focus onsaving for a home as Huuti does with its proeprty laddder plan.

Collect vouchers

If you want to startv saving for a house at the age of 18 then you may want to consider using vouchers to bring the cost of your monthly expienses as low as they could possibly be

Many merchants offer vouchers foruniversity students and to the general public which could save you on meals, gyms and even travel.

You should look for a reliable and steady source for vouchers which can cut your monthly expenses and ensure you have more money tp save towards the mortgage deposit for your home.

Shop at cashback merchants

Aside from using vouchers you may also want to shop at merchants who offer cashback. 

This will allow you to reduce the cost of your monthly espenses and have more money to put towards the savings pot for your mortgage deposit.

Get a cashback credit card

You may also want to consider getting a cashback credit card which pays you cashback whenever you use the credit card. This could help you sigifcantly reduce the cost of your monthly expenses.

You should note that when appying for a cashback credit card itis best to use a crdit card eligilbity checker which displays if you are eligble for the cashback credit card or not rather than applying bindly and risk getting rejected for a credit card which may damage your score.

Build your credit score

If you want to start saving for a hosue at 18 then younshoild 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

Put your money in an ISA or Index fund

You may also want to consier putting your mney inan ISA account or a linked index fund account. 

INDEX funds hav ebene known to outperorm the markets over a long period.

You should get indpendent financial advice on this.

Keep your eyes on Government schemes

There are a variety of government schemes which may be able to help yu buy a house.

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 property ladder app

If you want to start saving for a house at 18 then you may want to cosider using a proeprty ladder app susch as Huuti.

Huuti will help you save each month, analyse which government or private makret schemes you may be eligoble for and help youget a mortgage to buy your property once you are ready.

Use a mortgage broker when you are ready to buy

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 blog, we discussed how to start saving for a house at 18.

If you have any questions or comments then 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.