The dos and don'ts of saving for a mortgage

Setting a budget will help you stay accountable for what you’re spending your money on. Start by considering all your essential monthly costs and decide what you’re comfortable cutting back on. Then you will see how much you can put away everytime you get paid. There are plenty of free budgeting apps you can use to help you with this.

Reviewing some of your biggest outgoings, particularly anything that’s on direct debit from your account can help you make a lot of savings. Look at gym memberships or subscriptions that you don’t use. If your contracts are up for renewal research a cheaper alternative while you’re saving for your mortgage. You can also have a look at reducing any extras you don’t need on your phone plans or car insurance that might help boost your savings.

We have a handy blog post on how you can reduce your car insurance premiums with help from The AA.

To get yourself into a mortgage saving mind frame, set yourself a realistic timeline. Keeping your end goal in mind can help you avoid spending money you could be saving.

After you have set a timeline keep track of your spending for the next while. This will help you see what you are spending most on each month and whether you could cut back on some things.

If you have a separate savings account that’s dedicated solely to saving for your mortgage you will be less tempted to dip into it. Consider setting up a notice deposit account. This means you must request access to your funds in advance. Before you open your savings account make sure you shop around for the best interest rate.

This is a red flag for mortgage lenders and will be seen as a sign of bad money management or lack of money. One late fee won’t affect your mortgage chances, but if you haven’t made any payments before your next statement, you could damage your credit history. Avoid any issues with late credit card fees by setting up a direct debit each month to cover credit card bills.

Any record on your credit history will be considered for your mortgage application. Having multiple loans or missed repayments are red flags on your financial history. While it might not be something you planned to do, having too many outstanding loans can make you a higher risk applicant for mortgage providers. Any missed loan repayments will negatively affect your credit history.

Why it might seem like the easiest thing to do, no bank will consider you for a mortgage, before checking the central credit registers (CCR) for any other personal loans, credit cards and overdrafts you might have.

It’s the little things that you spend your money on that add up to more in the long run. Saving for a mortgage is a long-term goal so you may want to rethink changing your daily habits. This could be anything from walking to work to save on bus fare or making your coffee at home.

Within your savings, you will need to consider the extra costs that crop up in the final stages of getting a mortgage. So don’t forget to budget a little extra for mortgage protection, stamp duty, solicitors’ fees, and site surveys. You won’t be caught off guard by extra costs if you consider them in your savings plan.

The pandemic left a lot of people with the inability to save for their mortgage and even delayed mortgage applications. If you had to dip into savings over the pandemic have a look at your budget and timeline and edit it accordingly.

If you are no longer on the PUP and back to full-time employment you can apply for a mortgage as usual.

If you are currently on the PUP, you will not be considered for a mortgage. Once you get back into full-time employment you can get your savings back on track and then apply for a mortgage.

If you previously were supported by the wage subsidy scheme and you are now back to full-time employment, you will be able to apply for a mortgage as usual.

If you are still on the WSS and ready to apply for your mortgage, you will have to supply extra documentation from your employer. It is not impossible, but some lenders will find it hard to sign off on a loan if your employer is still on the WSS.