How to Save Money for a House While Renting
When you’re renting an apartment, saving money to buy a house can be a challenge. You might even find yourself asking, “Should I rent while saving for a house?” The good news is that, by strategically trimming down your expenses, you can rent and still save for a house—and these simple money-saving tips for renters can help. Start getting ahead financially while renting so you can become the owner of the home of your dreams.
Tip #1: Consider Financing Options
To begin with, you’ll need to set a goal. For a quick preview if renting or buying makes sense financially for you, check out the how to use a rent vs. buy calculator. And if you want to know the exact number you should save and you aren’t planning to pay all cash, find a home financier and get pre-approved. Your home financier will help you determine how much you can afford and you can work your way to that number. Taking the steps for a pre-approval will also help you make the decision to rent or buy.
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Tip #2: Make a Budget
Once you’ve been pre-approved and know how much you need to save for your down payment, it’s time to make a budget. Figure out how much you need to save per month and find areas where you can cut back on. Put a list of your expenses together by reviewing a few months of credit card and bank statements to give yourself an overview. You may find you’re spending money on subscription or streaming services that you haven’t been using.
Tip #3: Scale Back on Non-Essentials
Saving for your down payment can be difficult, especially if you’re on a tight budget like most renters are. However, minor adjustments to your discretionary spending can add up to big savings. As you put your budget together, make a note of which expenses you can scale back on. For example, take a look at your cellphone or cable plan. Could you possibly downgrade if you don’t use the full package? Or maybe you don’t need to pay for a full unlimited gym membership and could do a pay-as-you-go option instead. Consider also cooking at home more often to save every month.
Tip #4: Save on Utilities
Take a look at how much you’re paying for utilities. Maybe it’s time to upgrade your appliances to energy-saving ones. Ask your landlord if you can do so and also ask if they can make small repairs such as improving the insulation or sealing any gaps that may be present around your doors or windows. This can help save energy when turning on the air conditioner or heater. It not only saves you money but is also environmentally friendly.
Tip #5: Consider Adding a Roommate
If you’re looking for another apartment to rent, consider getting a roommate. Two-bedroom apartments are oftentimes cheaper when dividing the monthly rent by two versus renting a one-bedroom apartment. Multiply those savings by 12 and you’re saving a lot for your down payment. Check out Facebook groups (make sure to verify identities and do so safely) or ask around for anyone who may be looking for a roommate. Split the rent with someone and cut down on your costs.
Tip #6: Negotiate Your Lease Renewal
If you’ve proven to be a good tenant during your lease, you can use this to your advantage when negotiating your lease renewal. From a landlord’s perspective, when you leave, they’ll need to take time to find a new tenant. They won’t know if the new tenant will be as easygoing as you were. Use this as leverage when negotiating. Also, consider tactics like asking for a longer lease for a lower rate and bringing up prices for similar apartments available for rent in the neighborhood. Doing this research beforehand also gives you options for other places to rent if your renewal doesn’t work out.
Tip #7: Look for Ways to Earn Additional Income
Outside of your day job, you likely spend time doing your hobbies. See if any of those hobbies can turn into side gigs that will earn you money. Maybe you like making handmade items. You can sell those on Etsy. Or if you’re really knowledgeable on a subject or speak another language, students are always looking for tutors. Try selling unused items on eBay or at a garage sale. Or choose a seasonal job like a tour guide in your city when the number of visitors increases during peak season.
Tip #8: Save Automatically
Now that you’ve found which expenses you can cut back on and also how you can potentially make more money, make sure you save it. Set up a separate bank account just for your down payment and make sure not to touch it for any other expenses. Ask your employer if they can separate your paycheck. Have a set percentage go to your special down payment account each time you get paid. Having it done automatically will not only allow you to save time but also keep it consistent, which will help in the long run.
Tip #9: Apply for Assistance Programs
For eligible first-time homebuyers, there are programs available depending on your income and state. For example, Guidance Residential has an ongoing partnership with Freddie Mac to promote homeownership by offering credits. These programs typically require you to take a first-time homebuyer education class. It’s worth the time spent to learn, plus you get credit towards your down payment.
Take the Next Step
As you can see, it is truly possible to save for a down payment while renting. The question is—what are you waiting for? Apply the tips outlined above, and start putting money aside today so you can realize your dream of homeownership. To get a preliminary estimate of how much home you will be able to afford, check out our free online home finance calculators.
Originally published August 2020, updated January 2022.
