Are you wondering how to buy a house even though you are presently renting? This post is for you.
Owning a home is a dream for many people. However, in the last few years, becoming a homeowner has become a pipe dream for many people, especially those born between 1979 and 1995 – the millennials and generation Z.
These millennials and generation Z are now being referred to as ‘generation rent’ due to the difficulty of getting on the property ladder.
If you are interested in getting on the property ladder, but still struggling to save for a house while renting, here are a few ideas that can help you reach your goals faster:
Budget & Save
One of the first ways you can start saving money for a house as a renter is to start budgeting and saving using budgeting and saving apps. There are so many budgeting and saving apps online that will help you budget your money appropriately and help you save.
You can download some of them from your App Store/Google store and start budgeting. You need to understand how much is going in and out, and how much you can save monthly.
Some apps will take money from your account every time you make a purchase, round it up to a whole number, and save for you. If you buy something worth £14.99, these apps have been designed to take the 1p left and save it for you.
Some apps will tell you how much you can afford to save every month once you have budgeted on the app.
Reduce your Bills
Bills are the things eating away at your income. Cancel unnecessary subscriptions. Cancel Subscriptions that you have not used in the last three months or double subscriptions.
Double subscriptions mean you have amazon prime, Netflix, and Disney plus. You need just one or two TV streaming services to entertain you.
If you have double insurance, cancel one of them. If your phone contract has expired and you are still paying for it, review it and cancel it. You can reduce your utility bills by switching your energy provider if you have been with them for more than a year.
If you want to stay on top of your energy bills, you can use platforms like u-switch in the UK or US that helps you switch between energy providers.
If you are in Nigeria or a country that does not use automated bills, you can still reduce your bills by looking at how much you spend on electricity and gas. You can cook in bulk to minimize gas usage, switch off bulbs and appliances that you are not using.
If your mobile phone contract expires, keep your old phone and get a sim-only contract that will cost you only about £12 monthly and offer you unlimited calls and data.
Downsize your Rental Home
If you currently live in a rented five-bedroom apartment, you need to think about moving into a three-bedroom apartment. If you are a single person and have a good relationship with your parents, you might consider moving back home.
You could also move into a house share where you use one room in a big house with other people using other rooms, so all of you can split the cost of the rent and utility. For a family of three, you may want to live in a two-bedroom while you save up for your dream home.
It is important to downsize your rental accommodation even though it may be difficult as it may look like you have financial problems. Your friends may wonder what is happening and why you are moving to a smaller apartment.
You must learn to block out the noise and focus on your goals of getting on the property ladder and becoming a homeowner.
If you think you will be saving over the next two to three years, downsizing is a good idea, but if you have saved up more than half of the money you need to get on the property ladder with only about six months of savings to go, you do not need to downsize. Stay where you are and keep saving.
Stop the Decor and Renovations
If you are a sucker for beautiful space and fancy aesthetics, you have to watch how you spend on interior décor for the house you are renting.
You do not need to do a new bathroom. Do not get in touch with your landlord to ask if you can do a new flooring for a new kitchen. Keep the money for your savings for a deposit. Stop the renovation!
This is not the time to start buying furnishing and rugs because they might not fit into the new home you intend to buy.
Imagine living in a rented flat, but then you buy a heritage home or a barn-structured kind of home, that furnishing in your rented flat is not likely to fit into the old barn-style home you just bought.
It is also possible that the furnishing you are buying now might be too small or too large for the new home you are moving into. Stop doing up another person’s house if you are not planning to remain there for the next five years.
The only thing you owe your landlord is to paint the house and put it back into the lovely state it was when you started renting it. You are not required to give your landlord a brand new kitchen.
It is nice to paint the house when you are moving out and receive your deposit, but beyond that, you do not have to do all that décor or renovation.
Make your Savings Work Hard for You
Do not just leave your savings in your current or savings bank account in your bank while you keep throwing in £200 as you wish. That would not help you reach your goal fast. If you are in the UK, you need to open a stocks ISA account and invest your money.
You can invest that money for a year or 18 months to grow before buying property. You can also put your money into premium bonds in the UK.
With premium bonds, you would not earn any interest on your money, but you get entered into a draw every month where you can win up to a million pounds.
Increase your Income
One of the things I did when I was trying to get on the property ladder was work to earn more money. There is only so much you can save from your current income.
Bank of Mum and Dad
This option does not apply to everyone, but you can explore it if it is a possibility for you.
If your parents are financially comfortable or they have a little extra which they do not mind giving or borrowing you, explore it to allow you to get on the property ladder.
You might be lucky enough to get parents who are ready to chip into your pot, so ask them politely.
The advantage of this idea is that if your parents give you a loan, you will not be under extreme pressure to pay it back. Most parents would give you a loan that does not include interest.
Help to Buy Scheme
The government put this scheme in place to support you in getting on the property ladder faster by putting down a deposit for you. Help to buy schemes are usually on billed properties, and it is worth exploring if you are a first-time home buyer.
A 95% Mortgage
Many people do not know that you can get a 95% mortgage where you only put down a 5% deposit. The beauty of this mortgage is that it reduces how much deposit you have to raise; it also means that your mortgage is a bit bigger.
So you must buy the kind of property you need instead of a vanity property. If you are trying to buy a £300,000 home, you are only required to save £15000, which is a good thing because a 10% deposit will mean much more savings.
However, to do an 85% mortgage, you need to have a good job that allows you to take a bigger mortgage and have good credit. Also, a 95% mortgage is not common in the sense that not every mortgage provider will give you.
A good mortgage broker can connect you with a 95% mortgage and help you access it if you are qualified for it.
Don’t Buy too much House
This is very important if you want to get on the property ladder. Your first house does not have to be a 5-bedroom apartment or be a million pounds home.
You can start small with a 2-bedroom, wait for it to increase in value, save more money, sell your home, and move up into a three or four-bed.
Then you repeat the process until you get to the kind of home you desire. If you are a family of two, you do not need a five-bed. Buy just enough house for the size of your family because owning a home goes beyond just paying a mortgage; a bigger home means more utility bills.
This option is available in the UK. It means you are buying just a portion of a house. This will help you save up for only the portion you are buying.
If you are buying a home worth £300,000 in value and want to own 50% of it, all you need is a deposit of £7500, which is 5% of £150,000.
Be patient with yourself, with your dreams and goals. You do not need to worry about it all the time. It can make you miserable and affect your mental health general well-being.
If you get discouraged, you may stop saving and start rewarding yourself by buying things you do not need and spending more because you are not saving. It does not matter how long it takes, as long as you are committed to the journey, you will get there.
Saving for a home while renting can be a bit challenging but the pride you get from owning your own place makes it more than worth it.
Till next time.