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.

@wowhie

I didn't know 100% mortgages still existed

I don’t think they do? A few people on this thread mentioned getting them in the past but I can’t see any mention of them being offered now.

I do think the key is to try and get on the ladder before having kids. We saved for 5 years for our house, and have since moved up to our bigger family home, but couldn't imagine having to do the level of saving we did back then now we have children. Are help to buy ISAs still a thing? A couple we know did this and managed to buy their first home alot easier. Or a help to buy mortgage? Usually need a much smaller deposit with one as there's less liability as you don't own the full amount.

@Highwind

Overtime, overtime and overtime.

We don't have kids, we won't have any inheritance, we private rent and we both earn about 27k each normally. My job allows overtime and I have done a every shift under the sun to save our deposit.

We also utilised a Lifetime Isa. The two of us are both first time buyers, In the last year and 8 months we have managed to save £50k (6k was from from our lifetime ISA bonuses).

We have ignored our birthdays, not done anything for Christmas etc. Not gone out to eat, no trips, no gifts, zeroed our expenditure to just the cheapest foods. (We actually went out for our first meal out in that time this week!).

We are 5k away from our 15% deposit and then need to work on fees etc.

(But there are no houses that suit us on the market now!).

In 20 months you saved 44 grand?

£2.2k/month?

Isn’t 27k something like £1800 take home (assuming no pension contribution or student loans). So £3600. You must be doing a lot of overtime!

Also, LISA is £1k bonus pp per tax year. In the last 20 months there have been 3 tax years I guess, but why you would put another £8k for tax year 2021/22 when you can wait until March 2022 and invest that money in higher yielding accounts, I don’t know.

It's difficult you have above average children but below average income. So I think this will be really difficult. Historically poor people didn't buy houses except the scam of selling off council houses. You need to increase income basically and economise.

I think that shared ownership is your only realistic option in the circumstances you describe, as it’ll require a smaller deposit & enable you to access a family-sized home, rather than a traditional first time buyer property ie. a 1 or 2 bed flat. You could also look into ‘Discount Market Rate’, which is similar to shared ownership, but you don’t pay rent on the portion you don’t own. However, I don’t know if this a nationwide scheme nor whether family-sized properties are available, as my colleague who used this scheme, bought a flat in London.
Alternatively, is there any chance you could access social housing, as this would certainly give you security of tenure? As it would be so much cheaper than private renting, (50% where I live), when you qualify, you’ll be in a better position to save for a deposit, or you might be able to buy the house you’d be living in, at a discount.

I wish you good luck - the housing market in this country is so distorted & inaccessible to those without inheritances nor parental support.

@Itsprobablynotcominghome

That’s right. We are both key workers in different fields. I work 12 hour shifts in a factory. My wage went from my usual 27k to 45k in 2020, and I have been doing the same again since April this year (Doing every hour available to me but especially the more premium paying shifts such as extra nights and sundays etc).... winding down now though, that level of overtime for that length of time is not sustainable.

It almost blew my marriage apart...

No pension, no student loan. Will worry about pensions when we finally buy and get settled.

We started saving in December 2019, managed to fill up our 2019-2020 ISA, then both put 4k in during tax year 2020/2021. And dumped another 4k in each in April this year.

We have been extremely frugal, but it’s the overtime which really expedited our savings.

We bought first property in 2000 with 10% deposit. This was when our 3 bed semi was costing us £83000! Moving next month with 80% deposit built up through years of rising house prices, low interest rates and overpaying mortgage every month for past 2 years. Worrying how my kids will ever buy though. We bought first house pre kids when we had a frugal lifestyle

Hi Op,
I’m in the US, so please excuse me if I’ve got this all wrong. You’re doing an MEng-so you have a bachelor’s degree in engineering and your salary is 27k? I didn’t realize engineers were paid so little in the UK (in my area common starting salary is $69k app £49k). Will you be able to change jobs when you complete your MEng and make more money?

They don't. Either get help from parents. Or save while living at home.

You can get a 2 bed flat for that in many areas near my home. It’s no ideal but somewhere to start from.
We got the deposit together by not going for holidays (not even within the U.K.), never eating out and only buying stuff from charity shops. Only cooked from scratch and bought the basic range.
On pay day, we always used to put away the amount we intended to save and then survived on whatever was left. It was tough for a few years but we made it in the end thankfully. Started with a one bed flat and went from there.

Hushpuppy1
Some universities in the UK offer a 4 year MEng degree so it's an undergraduate and masters in one course. If the OP is doing one of those those she's not in a graduate job yet, which would explain the salary.

So we have saved about 13k in the past couple of years (2k emergency fund, 5k wedding 7k/14k for house deposit) on a fairly low income- DH earns around 13k and I’m a student, but we don’t have to pay much childcare as I get a university grant

Obviously the childcare costs will hold you back and there’s not much to be done about them for the moment but some things that have helped

• Make use of any government schemes and bonuses. We had help to save accounts (available to people on tax credits, if that applies to you?) which give you a 50% bonus at the end of two years on savings of up to £50 a month. Once we got our bonuses we put that and the amounts we’d saved into a LISA and got another 25% bonus. Turned £2400 of savings into £4500

• I do surveys online in my free time, mainly on prolific academic as I find them to be the most interesting and best paid. Don’t fuck around with any of the ones that give you “points” instead of money as they’re rarely worth it

-I sell our old stuff on Facebook marketplace, eBay, ziffit.

We also run a 12 year old car, buy things secondhand, have cheap days out etc but it sounds like you do those things already. If you can’t save money any further you’ll have to find some ways to make some unfortunately.

It’s of absolutely no help to you but we saved a deposit whilst still living with parents and bought our first house before we had kids. I think that’s the way most people do it rather than renting and having kids then looking to buy

It depends on where you are. Near me you can get a 3 bed for £125k or just under. For me lockdown helped and I’ve saved 15k in a year so have a full deposit now. In total my house is costing £125k and I’ve saved a 30% deposit which took me 3 years. No help from anyone I’ve done it on my own .

Oh yay, that’s great, it may also be worth doubling up to full time where you can. Definitely don’t do this with the modules you’ll find ‘hard’ but there have been points that FT work and FT study was ok. Certainly not sustainable though.

@Hushpuppy1 MEng is 4 years full time and 8 part time, it a ‘bachelors degree’ and straight on through to masters without ‘graduating’.

I set up a direct debit so that a proportion of my salary would go directly into a savings account before I even noticed it was in my account. If I had anything spare at the end of the month, that went in a separate account so that if I had an unexpected bill, I didn’t have to dip into the main savings account to pay it. It took a few years to have a decent deposit.

Flipping it on its head there was a programme a few years ago called how to pay your mortgage off in two years www.bbc.co.uk/programmes/b006sh31 they had lots of tips on extreme saving but all were advised to start some form of business as the quickest way to generate cheap income. Maybe worth watching the series to get ideas.

Thanks LolaSmiles and FTEngineerM.

Op it looks to me like you should concentrate on finishing your degree for now and stop worrying about houses and side hustles. Once that’s done you can change jobs and increase your salary. If you continue to live within your old income and save the difference it shouldn’t take long to save a deposit, no? Seems to me like your prospects are actually pretty bright!

@Whoarethewho

It's difficult you have above average children but below average income. So I think this will be really difficult. Historically poor people didn't buy houses except the scam of selling off council houses. You need to increase income basically and economise.

Yes. It's a bit of a long-shot now.

Nothing wrong with renting.

@Hushpuppy1 Even with the MEng completed, £25-30k isn't an unusual starting salary for an engineer here. Yes, it will increase pretty well after a few years experience (and it depends on the area of engineering you're in) but it would be extremely unusual for a new graduate to get the kind of salary you mentioned!

Shared ownership with a housing association? Much lower deposit which would be doable if one of you gets a pay rise.

DH and I have one DC and we couldn't Hunnish if we weren't already on the ladder. We both earn above average snd our first house we put a 10% deposit down of 21k in 2015. No way do we have capacity for saving like that now.

Pretty much everyone I know who owns their own home either got there through inheritance, a gifted deposit from parents or grandparents, living at home for a few years rent free to save a deposit, or a combination of those three.

My brother bought with a 110% mortgage back in 2006/2007 as not only did he not have a deposit but he had a loan to clear. No way you would get that now. Although to be fair his house is now in negative equity, and will probably never be worth what he paid for it.

I live in an expensive city where only very high earners can afford to pay the high rents and childcare costs while also able to save enough for a deposit.

Sorry OP, I'm in the same boat as you, I reckon I will be renting forever. Maybe in the next 20 years if I get an inheritance I could buy somewhere, but not otherwise, especially as a single applicant.

For most of my friends- instead of moving out after College/ University they lived at home with their parents and saved for a deposit.

Most people I know who got on the ladder did it by doing several years in a professional job and buying before they had children.