Saving For A House: Our Plan

Tuesday, 13 August 2019

It's quite a daunting thought to commit to saving for a house, initially we were both a little overwhelmed by the prospect of maybe not having holidays or being able to splash out over the next few years but as we continue to fork out thousands each month for rent and utilities it was a no-brainer, we desperately want a place to call our own!

We're in the very early stages of saving but I did a lot of research on the best ways for us to save and looked into all the options available to us so I thought I'd share some of my thoughts and findings you with incase you're in a similar position or hope to be in the future.

To give some context, we're looking to buy in the South East of England where house prices are incredibly high, as a result of this we'll be looking to get a 95% mortgage in a few years time, this means we have to pay slightly more each month in mortgage repayments but it means we only need to save 5% deposit as opposed to 10, 15 or 20% - which would take us forever!

Help To Buy

One thing available to first-time buyers is the Help to Buy scheme. There are two things on offer from Help to Buy and these are:

  • Help to Buy ISA: This is a savings account which most banks offer, once you open the account you can deposit up to £1,200 initially and then you can continue to save up to £200 per month going forward. When you're finished saving the Government will top-up your amount as long as you've saved over £1,600 in total. For example if you save between £1600 and £12,000 they'll top it up by 25%. If you save over £12,000 they'll top it up by £3000. 
    • Pros: 
      • Unlike a traditional ISA you get additional funding from the government to help boost your deposit. 
      • You can open one Help to Buy ISA per first-time buyer, so if you're a couple that means both of you can apply and potentially receive a £6000 top-up.
    • Cons:
      • You're restricted to the properties you can put your bonus and depost against. This is ultimately what turned us off. The property you're buying must cost less than £250,000 or less than £400,000 if you're in London. In Hampshire the properties we're looking at are from £280,000 upwards so this ISA would restrict us too much.
Note: Help to Buy ISA's are only available until November 2019 - so if you're considering opening one then make sure you do so before then! More info here.

  • Help to Buy Equity Loan: The other offer from Help to Buy is an equity loan where the government lend you up to 20% of the cost of your new home, so you'll only need a 5% deposit and 75% mortgage. 
    • Pros:
      • You only need a 5% deposit upfront plus a mortgage of 75% from the bank - this will cut down your costs and savings needed straight away.
    • Cons:
      • Personally, we see this as a con as it's limiting the houses you can choose from but this equity loan is only available on new-build properties. There are lots of different agents across the country taking part but it does limit your choice of home and location. 

Other ISA's

As we're not going down the Help to Buy route, we've got our savings going into two places. The first is a Cash ISA. This was set up by our bank and we pay in a certain amount each month with the availability of withdrawing it whenever we need to, simple. 
  • What is an ISA? ISA stands for Individual Savings Account and allows you to save money tax-free. Our ISA is a Cash ISA which is simliar to a traditional savings accounts except there are limits to how much you can save each year and you don't pay tax when you earn interest. You can pay up to £20k in this tax year, tax-free.
There are lots of other types of ISA's available, including stocks & shares ISA, innovative finance ISA and the Help to Buy as detailed above. Check with your bank to find out which ISA would suit you best. 

Company Saving Schemes

The last thing we looked into was our company's own saving scheme. We both work for a big UK company and one of the perks is their saving scheme so Rob is paying into this in addition to contributing to the ISA savings. 

The way this works is you buy company shares at a discounted price (we also bought the shares when they were quite low so this worked out really well) and you can decide at the end of the plan which is 3 years whether you want to buy new shares at a higher rate and make profit on your savings or alternatively if the shares aren't looking good you can just withdraw what you've paid in over the three years. So worst case scenario we've got another 3 years of savings at least up our sleeve but hopefully more!

Besides these savings we're making big cut backs in our lives, we're looking to downsize rentals if we can find somewhere that suits us so we can save a few more hundred a month that way. We've also made small changes such as changing our energy supplier and our food shopping habits to save money. We also hope to top up the savings account with any bonuses or extra money that might come our way over the next few years. 

 It's going to be hard work to get to our end goal but we know it'll be worth it at the end!

Are you saving for a home? Or have you got any great tips? I'd love to hear them!

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