How to save for a house while paying off debt
If you’re balancing debt and dreaming of owning a home, you might be wondering: “Should I pay off my debt or save for a house?” The answer isn’t always clear-cut, as everyone’s financial situation is unique.
However, you don’t necessarily have to choose one over the other. With a thoughtful approach, you could work towards both goals. In this article, we’ll share some practical tips to help you create a plan that works for you, so you’ll hopefully feel more in control of your money and confident about the future.
Create a budget for both goals
Having a clear budget is key to staying on track with your goals. It could help you manage your debt repayments and save for your home without feeling overwhelmed. The goal is to find a balance, so you’re moving forward on both fronts without sacrificing one for the other.
Start by adding up your monthly spending and subtracting it from your monthly income. This shows you how much disposable income you have left to put towards your goals. If possible, look for small ways to cut back on non-essential expenses. Even a little extra here and there could help you make progress.
Build an emergency fund
Before you start trying to save for a house or pay off debt, it’s worth thinking about building an adequate emergency fund. Expensive emergencies like car or washing machine breakdowns happen to everyone at some point, and having a financial safety net could help you avoid building new debt should an emergency happen to you.
Aim to save up enough to cover three to six months of expenses without having to borrow. So, if you typically spend £1000 a month on mortgage payments, groceries, utilities and other things you can’t live without, perhaps aim to have £3,000 to £6,000 saved in your emergency fund.
Maintain a good credit score
Keeping your credit score in good shape is important when you’re working toward buying a house. A solid credit score could give you a better chance of securing a loan with a good interest rate, which might save you money down the road.
To help protect your score, always make sure you’re paying at least the minimum monthly payment on any debts you have. Missing payments or paying late could affect your score and make it harder to get a mortgage when you’re ready.
Pick a debt repayment strategy
Beyond the minimum repayments, it could help to choose a structured way of paying down debt. Two popular strategies are the avalanche and snowball methods.
The avalanche method involves paying off the loans with the highest interest rates first, which lets you knock off the costliest debts first. On the other hand, the snowball method has you tackle the smallest debts first, which could help you free up money to repay larger debts.
Alternatively, taking out a debt consolidation loan could simplify multiple loans into a single repayment. Because these loans are secured against your home, they sometimes come with lower interest rates and longer repayment periods, making them easier to manage.
However, failing to meet repayments could put your home at risk, so it’s crucial to consider whether this option suits your situation.
Simplify your debt repayments with Evolution Money
The choice to pay off debt or save for a house might feel like an either-or situation, but it doesn’t have to be. With the right approach, you could potentially work on both at once. The key is finding what works best for you, and we’re here to help you do that.
If you have multiple debts, a debt consolidation loan could help make things easier to manage. At Evolution Money, we offer debt consolidation loans between £5,000 and £100,000 with flexible repayment terms ranging from 3 to 20 years. Our loans are designed to help you combine your existing borrowing into one manageable repayment.
Want to find out if you’re eligible? Simply check your eligibility online, with no impact on your credit score. Or if you’d rather chat, get in touch with our friendly team. Plus, for more useful tips and advice on managing your money, check out our help and advice hub.
Loans are subject to status and affordability checks.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debts secured on it.
Representative 21.54% APRC (Variable)
For a typical loan of £12,000 over 60 months with a variable interest rate of 21.54% per annum, your monthly repayments would be £310.60. This includes a Product Fee of £1,200.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £18,635.80. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
