We regularly see in the media that it is difficult to get a foot on the property ladder in the 21st century. House prices seem to always be at “record levels”, and they continue to grow ahead of both inflation and wage growth. 

In England, average house prices are currently 7.6 times higher than the average annual salary. This is 259% higher than in 1997 when they were 3.6 times higher. 

These figures are reflected in many countries all over the world, where growing populations, a lack of new homes being built, and increasing numbers of property investors are all driving house prices up. 

Wage growth doesn’t even get close, not rising above 7% per year in the last decade. 

Don’t let this put you off though, there are plenty of ways you can still afford a house. You just need to plan ahead.

Calculate the Down Payment You Will Need

For the average buyer, you pay for a home from two sources. The first is a mortgage from the bank, which is a loan you pay back over several decades. The second is a down payment or deposit that comes from your own cash. 

The down payment is usually the biggest barrier for first-time buyers, since it can mean finding tens of thousands in cash. 

The first step to buying a home is to find a price bracket you can afford comfortably, using an online mortgage calculator to see what monthly repayments you can expect. 

In certain regions you can get 90% and 95% mortgages, meaning you only need a 5-10% down payment. Once you’ve calculated what this is, you have your savings goal. From this, you can calculate how much to save each month.

For example, if you need a $10,000 down payment and you want to buy your home in two years, you’ll need to save $417 each month.

House Fund

Find a Savings Account

Now you know how much you need to save, you need to find somewhere to put the cash to help it grow and keep it safe.

Finding high-interest savings accounts is very difficult in the current financial climate. Banks have been slashing interest rates recently and they were already at record lows. In the US, there are several banks offering rates of around 1.5% APY, while in the UK, many accounts are slightly lower.

Some countries have special incentives to help people save for a home. In the UK, the Lifetime ISA gives you a 25% bonus on whatever you pay in. This money comes straight from the government and is on top of any interest you earn. It can only be used to buy your first home though. 

Cut Back On Your Expenses

The actual process of saving can take several years and requires you to make a substantial commitment. You will need to cut back on your expenses as much as is comfortably possible so that you can put as much money into your savings account as you can. 

You should look for areas to save money in just about every part of your life.

Entertainment spending is a good place to start. If you are an avid gamer, find free to play games instead of buying new ones. There are free versions in every genre, with online games like PokerStars giving all new players free chips when they sign up and World of Tanks, which is a massive online tank battle game that is free to play. 

You could also consider giving up your premium streaming subscription with companies like Spotify and switching to a free, ad-supported package. 

You can cut back on food spending by eating out less and switching to supermarket brand products. You can also begin batch cooking and preparing lunches for work so you don’t have to buy expensive sandwiches.

If you want to accelerate your saving, you can also find extra work or start a side hustle to bring in extra income. 

There are plenty of guides and communities online that share tips on how to control your finances and save money, so it may be worth joining some of these.