We look at the different ways you can make a mortgage more affordable
You’ve probably heard all the usual money saving tips like “Don’t go out as often” or “Stop buying takeaway coffees”.
But the cost of living is hard, and renting costs often works out the same as mortgage payments. So how are you supposed to save?
The good news is there are ways to make owning a home achievable. Let’s look at what’s out there.
Get more information about mortgages
How much should I save for buying a house?
The general rule is the more you can save for your deposit the better.
Before the pandemic, you could get a 95% mortgage. This means you’d only have to find 5% of the property value for a deposit.
They’re not as common now and some lenders are only accepting deposits between 20% and 25%. This could change though.
Here’s a whistle-stop tour of the other fees you’ll need to budget for:
This is the fee that you pay to work out how much the house is worth.
The valuation is for your lender’s benefit. This way they know that if you can’t pay your mortgage for any reason, they’ll get a good amount for the house.
It usually costs around £250, although some lenders may provide this at no extra cost.
To make sure the property is structurally sound, you may want to have a survey.
A surveyor will check the property for any signs of subsidence, damp or anything structural that could come back to haunt you at a later date.
You can get different types of survey. But it’s worth forking out for a thorough one.
Depending on what you go for, it could be between £400 and £700.
This is the cost of sorting out your mortgage. There are usually two fees, the mortgage arrangement fee and the booking fee.
It can vary in price, but it can be up to £2,500.
A lot of legal legwork goes into buying a house. This is where a solicitor comes in.
They’re responsible for transferring ownership (conveyancing) and checking for any legal issues that could cause problems.
This is a costly job, usually ranging between £500-£1500.
If you’re using a broker to find you a good deal on your mortgage, you might have to pay a broker fee.
Some are free to use, others might charge. You should never use a broker that charges upfront though.
You could expect to pay up to £500 for this.
Land Registry fee
Once you’ve bought your house, the Land Registry will have to change the name on the property from the previous owner’s to yours.
How much you pay for this depends on how much your property is worth. The more expensive your property the more you will pay. But it’s usually up to £500.
You pay stamp duty to your solicitor. In short, it’s the tax you pay to the government for the ground your house is on.
If you’re in England or Northern Ireland and you’re a first-time buyer you won’t have to pay stamp duty on a property that’s under £500,000.
If you’re a first-time buyer in Wales, you don’t have to pay stamp duty on properties that are £180,000 or less.
If you’re a first-time buyer in Scotland, you don’t have to pay stamp duty on houses £250,000 or less.
For more information on stamp duty and what it could cost you, take a look at our stamp duty calculator.
Budgeting and saving
A popular way to save is the 50:30:20. The rule was coined by an American senator and bankruptcy expert, Elizabeth Warren.
The numbers refer to a percentage of your monthly wage, divided into different categories. Here’s how you break it down:
The 50% is your bills. That’s rent, energy, broadband and phone costs. According to the rule, this shouldn’t exceed 50%. If it does, look at ways you can reduce your bills.
30% of your income is your ‘wants’. Things like meals out, drinks, concerts and cinema tickets.
The remaining 20% is what you can then afford to put into your savings.
The hardest part is portioning up your income. But once you’ve done this you should be on your way to healthy looking savings account. Remember, as good as the rule is, it’ll only work if you stick to it.
Most online banking apps come with a spending tracker. You can get a good overview of what you’re spending money on, and what you could rein in.
If you don’t have an app with this included, try writing down all your outgoings. When it’s written out you can see exactly what you’re spending your money on.
Read more: Why don't renters switch energy provider?
Apps for saving and budgeting
Barclays, NatWest and Lloyds TSB all have online banking apps to help keep track of your finances.
Some also come with a spending tracker so you can budget or rein in where you can. Monzo is a well-known example that offers this.
There are also specific apps that are designed for budgeting, some examples are:
With most of these apps you can choose how much you want to spend, and how often. Some may take small amounts and put it into your savings without you even noticing.
These are effective as they save little and often, rather than taking a chunk out of your pay packet each month.
Be sure to check the app credentials before you download it – make sure you get it from a reputable site too.
If you don’t want to use online banking, you can simply write down all your outgoings and budget from there.
Read more: How to improve your credit score
Putting your bills under the spotlight could save you some money.
Cancel any unnecessary direct debits
Now you’ve got a handle on your finances, it’s worth looking at your direct debits.
Do you have a subscription from the 00’s for a magazine that you never read? Or maybe you’re subscribed to one too many streaming services?
For example, £8 a month might not seem like a lot, but if you’re not using it you’re losing out on £96 per year.
Switch energy provider
Ever thought of switching energy provider? It could save you some much-needed cash for your deposit.
Most don’t realise that you can switch energy providers in rented accommodation too. Our guide on this explains all.
Mobile phone contract
Do you need unlimited data, calls and texts? Maybe you’re paying for extra features you may not be using.
Before you compare, check out our data usage calculator. This will help if you’re worried about going over your monthly allowance.
Once you know what you need, it’s worth seeing if you could save even more by switching provider.
Keeping track of your savings is much easier if you have a savings account. You could also earn a bit back on interest too.
The amount of interest you get back depends on the type of savings account you have.
Accounts that you can access freely typically have a lower interest.
If you put your money away in an account that you can’t touch, you’ll benefit from a higher interest rate.
An example is a Lifetime ISA. If in doubt, speak to a financial advisor.
Downsize your rented accomodation
One way to reduce your outgoing bills is to downsize your rented accommodation.
You could either rent a room in a house share or change from a house to a studio flat.
If you’re in a house and you have a spare room, see if your landlord will let you get a lodger. Mention that you and the new lodger would pay a slightly higher combined rent. This should still work out cheaper than renting solo.
You could see if your area runs a property guardian scheme. Here you pay minimal rent to look after an empty property for a while.
Look into co-living developments
These are flats with communal spaces. Like a bathroom, kitchen or living room.
Living in one of these could save you some much needed cash, and the hassle of getting housemates together for a house share.
Help from your parents
One option to save some cash would be to move home with your parents.
It’s only courteous to offer them money towards bills – but you can pretty much guarantee that it won’t be as much as a landlord would charge.
If you tell them your intentions, you never know, they might be able to help you with your deposit.
Schemes to help you buy a home
Equity loan: Help to Buy scheme
The government is offering a Help to Buy scheme on some new-build properties.
You put down a 5% deposit, the government puts in 20% – or 40% in London. You borrow the rest from the bank.
Rent to buy scheme
This is sometimes referred to as rent to save, rent to own or intermediate rent. Again, it’s only available on new builds.
You rent the house at 20% below the market value for up to five years. The idea is that the rent is low enough that you can afford to save for a deposit.
After five years you can buy the property outright or buy it under a shared ownership scheme.
This is a long-term solution to owning a home.
You have the option to put down a deposit between 5% and 15%.
You then secure a mortgage to buy a share of the property from the housing association.
The share is usually between 25% and 50% – or occasionally up to 75%.
Our first-time buyers’ guide can give you more information on these schemes.
Types of mortgages
This is where a family member or a friend can help you get a mortgage by putting down 10% of the property value as a security payment.
You can borrow the full property value if you choose to go for a springboard mortgage as the 10% payment acts as a deposit.
It works out well for the friend or family member too, as they get a good interest payment on their savings.
A guarantor mortgage is when someone agrees to cover your mortgage payments if you can’t pay them.
Your mortgage would be secured against your guarantor’s home.
If you can’t make the payments, your lender will use the value of your guarantor’s home to recover the costs.
Unfortunately, 95% mortgages are on hold due to the coronavirus. But it’s worth keeping an eye out in case they resume.
With this scheme, you only need to get together 5% of a property’s value for a deposit. Your lender pays the other 95%.
For example, if you buy a house that’s worth £240,000, you’d only have to get together £12,000.