How do people save a mortgage deposit?

[Bananapuppy]

Exactly that- any advice welcome please!
Three children and associated childcare costs, renting, two incomes but at the lower end of the salary scale (£27K & £20K). We just don’t seem to have any money to save and we’re desperate to buy our own home.
All the very helpful advice online suggests not drinking (we don’t), not going on holiday (again, we don’t), not having an expensive car (you get the picture…). Basically, a whole range of cuts to luxuries which are out of our means anyway.
Any tips on real-life savings/ mortgage planning would be so gratefully received.

I will just add, in anticipation of the comments, that this isn’t simply a case of hideously bad life planning. I met my exH at 16 and spent 10 years in an awfully abusive relationship.
I left at 26 with nothing, but now 4 years on have a lovely DP, secure job, and am trying to get my life in order. Buying a house is the next sensible (yet seemingly out of reach) step.

@PerveenMistry

In most cases I know of, people do so before producing children.

Thats not a very helpful comment, I'm sure we all wished we had done things differently after the event!!!

I was a single mum to my son during his childhood, I had to move to a much cheaper area to be able to afford a house. I hated it working 7 days a week but I would do nursing agency nights at the weekend (my friend would have my son for the night for a few quid), after a year I had enough for a deposit. I wouldn't ever want to have to do it again but it was enough to save for my house and I was young so it was doable.

You're in a tough spot, paying for renting and possibly childcare.
Our situation is different as we bought pre financial crash so our house was cheaper and we only had a £5k deposit which we saved whilst living at home with parents.
We're in the NW which is cheaper and I can't say I know any of our friends/ colleagues that rent.

budget planner

Use this budget planner to work out your finances. It helps you to consider those less frequent purchases, and to factor them in. It’s a slightly depressing exercise, but worth it in the long run.

Threads like this made me have conversations with my dcs (both recently left school) and ensure they start putting money away.

Hate to sound defeatist OP, but we were in the same situation as you and we didn't manage it. It would have taken well over a decade to save even a tiny 10% deposit, and that would have meant foregoing all of the few treats (dirt cheap UK holiday once a year, occassional meals out) that stopped life just feeling like an utter slog.

We just bought our first home after a close relative had an unexpected windfall. I have never felt luckier or less deserving, but we weren't going to turn it down.

I'm sorry to be such a downer!

I would say that you should hold this as a long term aim. You are still both quite young actually. It will take time and require resourcefulness but you can do it!

Are any children still in childcare? If so as they start to leave, redirect that money into saving, as you won't feel the impact on your lifestyles.

Start with small amounts - great tips above about general budgeting, selling your stuff and frugality. This will be part of the picture because you must be clever with your money. However don't make life entirely puritan. This will be for most of your children's childhood and memories and fun are also important for all of you. But be clever.

Then put your money into a LISA, as you get free money (additional 25% up to 4000). But you need to learn about INVESTING this money not just saving as cash with interest rates. This might seem scary and overwhelming. I felt this way when I first learned about investing. Understanding it took time, I chipped away for years and have grown and improved across that time. It is one of the most empowering things I've done, and I'd really recommend it. As mentioned above, the FIRE movement (there is a thread on here) often is accessible (there is a thread on here), and the information will be relevant even if its focused on early retirement. Or the Meaningful money podcast. Money Saving Expert also has great threads. Start today by saving, but get into investing asap to give your money time to grow. Start today, refine along the way. You can totally do this and honestly its AMAZING how money grows, even over 5 years.

Don't neglect your retirement, as again, small amounts now will make a big difference later due to the magic of compounded investment returns and government top ups.

Then as the kids get older you will find suddenly your salaries are higher, your requirements are less specific (school catchments won't matter, you can live somewhere cheaper), you will be able to take on side hustles etc later on. Plus with long mortgage timeframes you can get your bit of security.

If you don't start, you will never make it, that would be guaranteed. If you make a start, I reckon you'll get there, even if it takes time.

If you are on tax credits could you use help to save? (50% interest after 4 years) Also is there any self employed work you can do? There is a £1000 allowance for self employed work, so if you could find something where you could do say 2 hours a week, that money would be disregarded for tax and benefits.

Once you graduate, that chunk of time you're using for study becomes available to you again. It would be worth thinking about whether a second job would be doable at that point, with that money just going straight to savings - if you did that, I think you'd fairly easily be able to build up the amount you're talking about in the timescale you've mentioned, even if your main wages stay the same. Having studied alongside full time work before, I know that may not be an entirely attractive option - I'm sure you'd like to have the time back! - but if you go straight to using that time for work instead of study it would be fairly equal to the current situation, so should be manageable.

Me and do warm 25k each. We managed to get a 10% deposit by both being made redundant at the same time. Which was obviously not ideal, but the best thing to have happened to us.

Where in the country are you?

Look for a good HA in your area. In our city we have a fab HA who provide a wide range of affordable ways to buy. We bought using shared ownership which required no deposit. 4 years later we are selling and with the deposit from equity are able to buy normally.

They are also currently doing rent to buy and offering thousands of pounds towards deposits as long as people have lived there for at least 2 years.

We have been very very lucky to have this HA, worth checking out your local area.

Thank you all! I really appreciate the responses. Just catching up with the posts.

Thanks @ChocolateRiver. I hope your brother manages it too!

@Calmyertits Thank you. I have a savings account
but will have a closer look at what can be put away. The problem tends to be that we save a little, but then inevitably the car/washing machine breaks down and the money is pulled out again. We probably need a separate ’house savings’ account that we don’t touch!

@gigi556 Thank you - will look into Monzo. I didn’t realise it offered budgeting tools so that’s really useful, thanks.

@Andthenanothercupoftea Thank you. As others have said HTB Isa doesn’t exist anymore but I will look at other ISA alternatives.

Managed it by the skin of our teeth- ex had a small payout from a voluntary redundancy, got a new job and our broker found us a 95% mortgage. We bought in a cheap part of the country.

Speak to a broker, op, as there are new 95% mortgages on the market, but only available through a broker.

It's a really tricky situation you find yourself in OP, in 5 years time £15k might not be enough for a deposition a family home. Could you do something like buy a small flat that you rent out and start to build equity that way? I'm know life doesn't always workout as planned but having young children makes it very hard to save significantly if one of you is not a high earner.

@NoSquirrels Well, we try, but by the end of the month it has to be pulled out again. Or we manage it for two months but then something happens/breaks down and it’s needed. I think we definitely need two savings accounts. One for emergencies and one for deposit savings- thank you.

@AllTheUsernamesAreAlreadyTaken Thank you. I would prefer to avoid them as obviously new build houses aren’t always ideal anyway, and the repayments are ridiculous- but I know we can’t be picky.

@Patapouf Good luck! I know that if we lived in the South East for example we would never manage it, but here we have some hope. Good luck for DC2 also!

Haha @FTEngineerM assume away, you are correct! I will chase any interim certificates! Thank you. They’re all under 8. Little and often and chipping away at it will be the way forward definitely. I will definitely pay more notice to the smaller amounts! Thank you.

Our first home was a stair-casing scheme - basically renting but accruing equity at the same time. We then used the equity as a deposit on our next home.

It was excellent for us - our first home was lovely, we had to use solicitors who explained the whole process to us so we were aware from the start of any pitfalls and in some ways it was better than a conventional route because it meant we owned X percentage of the home whatever the value, we didn't need to worry about negative equity and our monthly payments showed up on our credit report whereas generally rent payments don't. I can't understand why these schemes aren't more popular. For people who don't inherit money for a deposit or who are on a low income so can make the monthly payments but would take years to save up the thousands needed for a down payment, they're life changing. It certainly was for us. I sometimes look around my current home (the one we bought with the equity from our first home) and can't believe my luck that we ever afforded it.

@WineAcademy

Managed it by the skin of our teeth- ex had a small payout from a voluntary redundancy, got a new job and our broker found us a 95% mortgage. We bought in a cheap part of the country.

Speak to a broker, op, as there are new 95% mortgages on the market, but only available through a broker.

A broker is a great idea! They tend to get great rates better than if you go to the bank directly and it tends to be the bank that pays the commission/ fee not you.

Just wanted to say though, lots of 95% mortgages are available through banks / building societies directly, rates aren’t amazing (as you’d expect) but they are there.

As many have said, the difference often between those who manage to buy and those who don’t, is those who manage, don’t have children until 5ey have bought. It makes a massive difference. Those whop have their kids young, are far more likely to remain in rented.

The way it can still work is if you are willing to move to a cheap area. In some places, those salaries, with a small deposit will get a mortgage.

More people could buy than do. They see the barriers to doing it as insurmountable and are unwilling to compromise…but we all have to compromise to get what we want…it’s a question if it we are willing to do so.

• move away from family to a cheaper area
• accept family living in a flat perhaps without garden and some bedroom sharing

If you aren’t willing to accept these possibilities it will probably be a case of continuing to rent.

In terms of saving a deposit so you can buy in a cheaper area, you might need to see it as a 5 year plan and accept there is no quick fix. Savings can be made by going into sim only for £5 instead of renewing phone contract and getting new phone. Shop around for cheaper utility provider (still possible in rented) and looking to axe at least £10 from your weekly shop…more if you can. How willing are you to live extremely frugally for 5 years to build the deposit.

What often happens, is people, are willing to make some very short term sacrifices for saving, but the longer term isn’t acceptable to them, especially when kids are already there.

It really does come down to jam today or jam tomorrow.

It is really hard when you already have kids. People say it doesn’t help to say delaying kids is key, when the horse has already bolted…..but that message needs to get out there to people so they can realise just how much this can affect the whole if your life and that if your kids too. Lots of people could manage to buy if they waited another 3-5 years for kids. Once you’ve got them it is much harder but the things mentioned above can make it possible…if you’re prepared for a frugal life and to accept moving area and possibly a property you didn’t consider a famiky property before.

Another unhelpful, it’s usually best to save for the deposit first and wait to have children. That train has clearly departed, so it will be much, much harder.
To move up the ladder, we did various things. The most useful was my husband doing three jobs, working all hours whilst I took on most of household tasks and childcare for a couple of years. We could live on one salary and save other amounts.

We also moved to other areas of the country and lived in tied accommodation for a number of years, to allow us to rent out our properties.

Our son used forces help to buy - would you consider one of you joining armed forces?

And yes, as a longer term aim it can be more possible.

Your kids won’t always be tiny. Childcare won’t always be a huge expense. It will be possible to work full time and to then do an extra 15 hours a week if you want to in a 2nd job.

The difficulty is that as 3 kids grow, the kind of house you want just gets bigger. You might still be looking at a 2 bed flat. Would you choose to buy a 2 bed flat rather than rent a 3/4 bed house? Essentially you’ll be looking at a starter first time buyer property. Most people when they start off can afford 1 or 2 beds…the family house for 3 kids is very much a 2nd or 3rd property after equity has been gained, further savings made and some of the original mortgage paid down. The issue with having 3 kids before buying, is you really need that ‘forever’ home right away….but it’s hard to afford even for those who’ve owned twice before.

I only managed to buy my first house because it was in the era of 100% mortgages. I'm looking to buy again next year and have only been able to boost my savings with a 5k birthday gift which is sitting in premium bonds. I'm a single parent and claim some UC so have a Help to Save account which pays a 50% bonus on maturing - check if you're eligible.

But realistically, saving is hard, could youlook at shared ownership so a smaller deposit required?

LemonRoses….good advice. There are ways for people who are willing to make big changes in their lives. Yes, property which comes with the job can allow bigger savings to happen. Yes, something like the Forces can help. Certainly, one person working 2 or 3 jobs can make the savings grow much faster. Moving to cheaper areas probably makes the biggest difference if you live somewhere expensive….but so many people say they can’t or won’t seriously consider it. I understand family ties and I know sometimes things like illness or disability absolutely make it impossible, but more people could buy if they don’t face these issues and would consider starting again elsewhere. But for lots of people who’ve always lived in one area and rely on family for childcare it is something that is beyond their comfort zone or experience if anyone they know.

The question is the will-power. These are hard choices with plenty of sacrifice involved. The determined usually find a way…but it isn’t easy. Those who’d rather have an easier short term life, often don’t find a way, but then decide those who did must have had it easy/an advantage they lacked. Whilst lots do have family help with deposits and advantages that led to them having high paid jobs etc, the low paid who’ve had kids early on DO manage it too…not through luck or advantage but lots of planning into the long term and bloody hard work. You can do it too.

We have just managed it in our early 40s with a combination of a reasonable inheritance, which was put in a bond for 3 yrs to grow, a lifetime ISA which we saved 4k annually and got a 1k bonus. However we also got family help, without which we never would have been able to do it as needed 15% deposit. We would have been able to get a new build with 5% but they are so overpriced with hidden costs it would have been a shame.

Also all the kids are secondary/further ed so no childcare costs.

It is really really hard. One thing we did was have a strategy and in a 5yr time frame we got rid of all debt, lived very frugally and doubled our household income through strategic job changes and buying a house was always at the forefront of any purchase decisions.

OP, can you accelerate your M.Eng in any way to get qualified sooner?

My situation is a bit different to yours (FTB at 21 on 100% mortgage bought months before the property market crashed and we went straight into massive negative equity), but my own take on money management is this-

Cutting unnecessary costs just isn’t enough for the average person, and income is the key.

I genuinely that message is a way that millionaires keep the working classes down- “if you plebs could just stop wasting your money on fags, you’d be as rich as me. Now back to your minimum wage jobs while I earn millions and smoke cigars and my equity firms buy up the properties you can’t afford to rent to you at a rate that’ll never allow you to save to own your own home”.

Think about it, most people aren’t out buying designer handbags and getting massages every week so don’t have have a large amount of spending to curb. Certainly, cutting back where you can (cheaper tv and phone packages, foregoing takeaway coffees etc) helps, but people on fairly low incomes supporting three children aren’t really spending all that much on coffees and magazines anyway.

Increased income is the way to go. In my case, I was made redundant from my job years ago, in the middle of a recession, and didn’t have the service to get a payout. We had to live on DH’s wage. We scrimped and still got in to debt- and not because I was buying handbags and coffees. Our 100%-on-a-property-in-negative-equity mortgage’s fixed term ended and rates went up.
I finally got another job but it was temporary and I was terrified of losing it so we continued living on DH’s wage, and used 100% of mine to clear the debt we’d built (to be fair, it wasn’t a huge amount but needed to go and go quickly) and the rest went into savings.

Then DH got promoted. Debt was gone at this stage so 100% of my salary went into savings and his higher salary was enough for us to live on without incurring more debt.

The years went on and DH was promoted again. My job became permanent and I was promoted twice in that time. We are now both high earners. We save 100% of my salary now, and about 40% of his.

I know that this will not apply to 99% of people and we’re so lucky that it worked out for us, but I would really encourage you to get qualified and earning ASAP. Engineering skills are in demand.

From a quick look online, engineering grad scheme seem to start at, or within a year move to, about £32k.
Have a look at large companies with diversity strategies who may have incentives for working mothers to join.
Lots of bigger companies will also have annual pay increases and performance-related bonuses.

Once you’re working in the industry, continue living as if you’re on your current salary and bank the rest. Literally have it taken out of your account and moved into a savings account on payday so you never get used to having it.
Make savings in other areas where you can.

And I get that you’re working and studying and it’s hard to find the time, but if there is a way of getting qualified sooner, you should try.

Look at it his way- if I told you there was something you could do from home 3 hours per week that would mean you’d have your deposit in 3-5 years, you’d probably snap my arm off.
Seeking an accelerated course of learning, and spending a few hours extra on coursework for a few years will benefit you in the long run.

I didn't know 100% mortgages still existed

What area are you hoping to buy in? £15k deposit.. what does that get you in terms of deposit and how much are the houses you're looking at. We recently got a mortgage, they offered us 4.5 times our joint annual income. So with your earnings you might be able to get in the region of £210k? Expect you'd need more than a £15k deposit though.

Honestly I think this is going to be really difficult. As the kids grow it gets more expensive. Rent goes up.. wages are not increasing that much.

There are additional cost that really mount up too, solicitors fees, stamp duty, surveys etc.

Good luck. It's not easy. But you can do it!!