How To Save For A House In 5 Years​

Preparation is the key here. Ideally, once you’ve committed any cash to your “house fund”, you want it to stay saved. That means no dipping into it any time an unexpected, unrelated expense crops up, like a car breakdown or a redundancy. You can’t control or foresee everything that might happen in the next 5 years, but you can take steps early on to help protect your savings. For starters, set aside enough extra cash for one-off emergencies so they don’t get in the way of your real goals. This might mean you have to start your house saving a little slower or a little later, but you’ll be better protected overall and it’ll help you keep your eyes on the real prize.

Keeping track of your claim is simple with the RIFT App and your MyRIFT account. Wherever you are, you’ll always know at a glance what’s happening with your refund. If any extra information’s needed, you’ll be able to upload it directly to make sure there are no delays down the road.

So here’s where things get serious. When it comes to deposits, you’re probably going to be paying somewhere between 5% and 20% of your new home’s asking price up-front. As of 2021, the average value of a first-time buyer’s home was a little over £264,000. That means some people were being expected to front up well over £50,000 as a deposit. That’s at the upper end, obviously, but even a 5% deposit at that price comes to over £13,000.

The thing is, a smaller deposit might lower that initial hurdle quite a bit, but it makes the whole race track much steeper. The more you can afford to pay up-front, the lower your monthly mortgage payments will be. With a higher deposit, you’ll find yourself in a much stronger financial position for years to come.

Let’s slot a few numbers in here so you can see how it looks in practice. We’ll assume you’re putting down a deposit on a house worth £264,000. You decide to be fairly ambitious, and go for a mortgage deal with a 15% deposit. That means you’ll be paying about £40,000 up-front, which you’ve given yourself a target of 5 years to save. At that rate, you’ll be aiming to sock away about £660 per month consistently over those 5 years to hit your goal. Challenging, but not impossible, so let’s talk about how to make it happen...

If you qualify for one, a Lifetime ISA (LISA) is one of the best ways to save toward your deposit on a first home. You can only get one if you’re between the ages of 18 and 39, with a yearly pay-in limit of £4,000. Why are they so good? Well, how does an annual 25% cash boost to your pay-ins sound? That exactly what the government offers on these accounts - meaning that if you pay in the maximum of £4,000 in a year, you’ll get it topped up by an extra £1,000 for free.

Obviously, there’s a little more to it than that. For example, like other kinds of ISAs, you’ve got a choice about how your money is used. A stocks and shares LISA will invest your savings in businesses in hopes of faster growth, while a cash LISA will pay out an agreed rate of interest. Since you’ve got a specific goal in mind here, you might decide that a cash LISA is the less risky option.

You can read more about Lifetime ISAs in our other guide, “5 Alternatives to Savings Accounts”. One key point to understand now, though, is that you really have to commit to them to get the benefits. There are rules about how you access your cash that can completely wipe out most of the rewards of saving this way, with a 25% penalty to pay on any withdrawals you make before the age of 60 unless you’re using them to buy a house. That basically blows your whole bonus if you take it out early or use it for something else.

Read our guide: Alternatives to savings accounts

Sometimes, the most obvious solution to a problem is still the best one. If it’s looking like you can’t afford to seal the deal on a new home purely out of your own pocket, why not go in with a partner, mate or relative? It’s simple maths; all things being equal, just one more person helping to put together your deposit will cut the time it takes to save it in half. If you’re not too bothered about the amount of time it takes to get your deposit sorted, you can simply bring down your monthly savings target a bit to give your month-to-month finances a bit of a breather. It works either way.

When you’re buying property, it’s not just your own money you’re risking. You’ve got to keep in mind that your mortgage lender will need to think of you as a safe bet. A clean credit history’s a great step in the right direction – and paying down your debts before you start saving seriously will actually make the road ahead a lot less rocky.

Speaking of keeping an eye on the future, don’t forget the extra costs you’ll be facing beyond your basic deposit and mortgage repayments. Solicitor fees, Stamp Duty and moving costs can all lump a lot of extra money onto your overall costs. Be sure to factor these into your budget so you don’t get tripped up later.

Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.