Simple Ways to Save for a Deposit whilst Renting

Trying to save for a deposit whilst renting can seem like such a daunting task especially as the lenders demand a higher deposit percentage for first-time buyers. As a first time buyer myself, I am here to tell you that It doesn’t have to be such a mammoth task, there are certain steps one can take to save for a deposit whilst (still) renting. It may take longer for some than others but it is doable with a little sacrifice, discipline and patience.

When I started looking at owning my own place a few years ago, I knew there were certain things I needed to get in order before I could get on the property ladder. Over the last 25+ years, homeownership has fallen in the UK thanks in part to the hefty deposit requirements by lenders. With the current market, you need to consider saving at least 15% of the actual house price. For many, this may seem like an impossible task but with a few changes, it can be done.

7 Simple Ways to Save For A Deposit Whilst Renting

As a renter, you need to first figure out your current expenditures, possible income streams and then cancel all unnecessary expenditures. It is only then can you start to budget how much you can actually save on a monthly basis or more frequently than that. It is also important to look at swapping your current favourite (and often more expensive) brands for something more affordable. 

When I started saving for a deposit, I swapped most of my grocery brands to supermarket own brands and in most instances there is no real difference. As I mentioned already, certain sacrifices may need to be made like no vacation for that year until you’ve bought a property or something similar. Other sacrifices can be no eating out, no clothes shopping and saving every little penny.

But even with all these sacrifices, you can still enjoy your life whilst putting money aside for your future home. In this post, I aim to share 7 simple ways to save for a deposit whilst renting, so listen up and tighten your belt. 

Increase your Income

Depending on your current income, you may or may not need to look for ways to make extra money on the side. When I started saving for a mortgage knowing I would need at least 15% deposit, I started saving all the money I earned from the blog. I am fortunate that I am able to make passive income from this blog so I was able to have a little more money on top of my salary to save towards my future home. 

Another thing that worked in my favour is my salary was good enough that I could have to save faster if it weren’t for student debt that I accumulated over the years. So having a good income plus a passive income made my efforts that much easier and faster than most to save for a deposit whilst renting.

Budget for every expense

Budgeting is something I am thankful I learned from my mother since I was very young and I wish its something they taught in schools. Before I even started saving for a mortgage, I already had a budget for my rental apartment. What I did however when I started seriously saving for a place of my own, I updated the budget to remove unnecessary expenditures like subscriptions boxes, magazines, iTunes and the like.

When renting an apartment, you still have a few essential bills that still need paying like;

• Rent – obviously 
• Electric and/or gas depending on your home
• Water
• Council tax
• Renter’s insurance (if necessary)
• Internet, TV license (or streaming services Netflix if you don’t watch live TV)
• Car – MoT, fuel and other taxes

I also had unnecessary bills like

• Gym membership
• Beauty box subscriptions 
• Food box subscription 
• Magazine subscriptions 

There are things that were easy to cancel as I knew I didn’t really need them but were nice to have. I had a little motto that I lived on for the year I was saving for a deposit whilst renting and that was, ‘if you don’t have it don’t spend it and if you don’t need it to spend on it’.  

Open a savings account with good interest rates

It is unfortunate that the help to buy ISAs is no longer a thing but they were the best savings accounts for first-time buyers looking to get a little extra on their savings. But even then, with a little research, you can find a savings account that has a good interest rate that can take your savings further than traditional savings accounts. 

I am someone who was never good at saving so outside of the help to buy ISA, I found fixed-rate savings accounts that did not allow me to touch the money for a certain period the best kind of accounts to own. Do some research and check with your bank on some of the best savings accounts they offer that can aid you as you save for your first home.

Open an investment account

I know this may not be for everyone but opening an investment account many years ago was the best thing I ever did. I was fortunate enough to work for a company that allowed you to purchase company shares on a more reduced rate. One thing I learned early on was that if I sacrificed a small percentage of my salary every month, I could buy stock and can sell it after a number of years. 

This was something that I had to be patient with and after 5 years of buying stock, it finally paid off and I had more than enough money to buy a house and have extra to reinvest. Whilst I am not saying you will definitely get money, investments are tricky but when they do payout, it’s often a really good one.

Downsize if possible

If you are able to reduce your rent by downsizing then I would highly recommend it as reducing your rent can help you save a little bit more every month. For most, it’s not possible to but for others, it could be moving into shared houses, back with your parents or moving into a cheaper apartment. If you are able to move in with a friend and pay reduced rent that too can help with saving for a mortgage.

This is something I wish I had done earlier and would have been quicker to save for a property, in my case I would have just needed 6-months. I know moving back with your parents for some might feel like a step backwards, it really isn’t its just a simple step back that allows you to jump further forward.

Consider shared ownership

Everyone wants to own their own property but not everyone can afford to either own a property outright or get a large enough mortgage. This is where shared ownership can help. With a shared ownership scheme, you have an opportunity to owner party on the house (25%, 40% or more) and down the road have an opportunity to buy the own property. With shared ownership, you still need a deposit but the mortgage amount will definitely be lower.

As a first time buyer, it can be really tough to get on the property ladder as you not only need to save at least 15% deposit, the mortgage affordability might be lower than you think which means more deposit will be required. Mortgage affordability is based on your annual income (other things are considered too) so if you earn £25k a year, you multiply by 4 and that’s how much you might be able to borrow but this is not accurate as they will consider other factors too which might end up lowering what you can borrow.

Borrow from the bank of Mum and Dad

If you are fortunate enough to have parents or guardians with deep posts or good savings, borrowing from them might be the quickest way to get you on the property ladder. Unfortunately, this is not always the case for everyone but for those who are in the fortunate position, I would jump on it and get all the help I can receive as getting on the property ladder is not easy. Once you get on the property ladder, its smooth sailing from there (if you keep up with your mortgage payments) and much easier (though more expensive) to get another property.

Saving for a mortgage as a renter might seem daunting but trust me when I say it is possible. Sacrifices will need to be made but it’s worth it in the end and you will own your own home. Don’t lose hope because it looks as if you won’t be able to do it but it truly is doable, I used various apps (like Plum) to help me save money.