How to save for a house deposit 🏠


#23

I bought many years ago but very happy that I did. There is just something about having your own place and my experience of renting was not great. If you are saving definitely look at a LISA as they are a no brainier for a first time buyer. 25% bonus from the government…


(Matt C) #24

The thing I am struggling with at the moment is deciding when to stop saving for the deposit and actually buy. My strategy originally was to get together as much of a deposit as possible and hold out as long as I could before attempting to buy so that I could hopefully borrow less and get a better rate. I just don’t know anymore! Obviously I could keep saving for years but I am also losing money paying rent right now. With all the brexit crap going on at the moment, I am even more confused (as are a lot of people).


(Graham - Mental health professional) #25

But very few will be able to own their house inside 10 years unless they’ve a huge lump to put down or a windfall to seal the deal.


#26

With rates currently so low, now would be a good time to buy and lock in a 5 year fixed rate mortgage.

*Please note - I am not a financial advisor.


(Dawid) #27

I rented for 11 years and I’m happy I had done so. When I wanted to leave, I left, no hassle. I echo what minority here is saying. Buying a house ties you down and not everybody wants to put down roots straight away


(Graham - Mental health professional) #28

And renting is by far a more popular choice in Europe than purchase.


(Andy Hughes) #29

We decided to stop saving and get to buying as soon as we had saved enough for something reasonable in our area. That way we’re at least on the property ladder and can always save more or add value to our house in order to ‘upgrade’ at a later date.


(Matt C) #30

How do you quantify “saved enough” though? I don’t really know what the best amount of deposit to have actually is.


#31

Have you been to see a financial advisor? It would be a good thing to do. Not one in an estate agents, a local independent one is best. They will assess your financial situation, then you can see the market for where you’re looking to buy and get an idea of how much what you want will cost and what mortgages are available to you for that amount.

It’s what we did. Then we either had to save more, or we had enough and started looking at property properly whilst still saving.

Obviously the bigger the deposit the less you need to borrow. The lower the loan to value, the better. But as you have already said, where do you draw the line.


(Andy Hughes) #32

Take a look at what the cost of houses you could see yourself in are. Then use something like money supermarket to see roughly how much you can borrow and go from there. You could also do it in the reverse i.e. see how much you can borrow and then look around at what you can afford to buy. If you don’t like them, keep saving.

This is also great advice. Just be aware that they may charge you for their service unless you arrange a mortgage through them, in which case they take commission (??) from the mortgage provider.


(Dawid) #33

True but also in most of the countries you can’t afford to buy earning minimum or close-to-minimum wage. Whereas in the UK even with minimum wage I used to be able to rent and save, which means I would be able to buy as well… unfortunately things work differently…


#34

Sure I get that, especially if you’re in your early 20’s. I just refuse to rent and pay more money on someone else’s mortgage than I would on my own. I get it’s different for other people


#36

Getting a mortgage in principle is a good idea. Make sure you get it from someone like london and country as they don’t charge you and it will not affect your credit score. They will be able to tell you how much you can borrow based on your savings, income etc. You can then see what you can get for your money and decide if you need to keep saving or have enough already.

Full disclosure. We are building an app for first time buyers to help them get on the ladder so spend all our time talking about this stuff.


(Matt) #37

It’s much nicer to have an investment then flushing your money into someone else’s bank account every month.


(Matt) #38

Where rent is controlled and house values aren’t almost guaranteed as they do in the UK. Renting is a giant waste of money in the UK. Between 2000 to 2015, house values increased between 350 - 450%. Why would you prefer to rent and see no return on investment?


#39

For the freedom of quick movement in and out of the country it gives.

Or even just up and down the country.

Once you know where you want to be that becomes less valued.


(Matt) #40

But you can have those freedoms as a homeowner - just rent out the property you buy. If you can buy but decide to rent, you may as well just be throwing your money onto a fire as in the UK property value is almost always guaranteed to increase significantly. Only in countries where housing prices remain static or depreciate e.g. US would renting be a smart choice.


(A/S/L?) #41

I find that I am able to save more effectively if I allow myself a few treats here and there during the month. A total ban would lead me to rebel and seek ways to rule break!
Whenever I was given a pay rise I’d live off of the old wage and save the difference. If I was given a bonus I’d buy myself a little something and then save the rest.

A big help is making batch food on the weekends, it means that I have lunch for the week sorted (and some evening meals). My only expenditure thereafter is mainly travel to and home from work (apart from the other monthly bills). I plan ahead when it comes to the week’s meals and create a list of dishes that I want to cook, then do the food shop strictly according to the ingredients that I need.

The Help to Buy ISA was excellent too, a tidy little bonus that went towards the solicitors fees!


(Duncan) #42

Because interest rates are extremely low. Bear in mind that they won’t always be.

Watch out for the LISA. Notice how very few banks offer them. There’s a lot of worry that this will end up as a mis-selling scandal. Bear in mind that you can lose money if you don’t decide to buy a house or use it for retirement. It’s not the same as the HTB ISA.

This is a fallacy. All housing has an implicit cost, even if you own outright without a mortgage, the house is a capital asset, and you could gain yield on that asset if you were not living in it. Check out “imputed rent”. Over the course of a typical mortgage - say 25 years - the renting and buying will approximately be the same (excluding the amount that you pay towards the principle).

Alternatively: with rates so low, which has been the primary driver for house prices going higher, now would be a terrible time to lock in those high prices; you still have to pay it all off, and in 5 years rates could easily be 6% (as is the long-term norm).

Famously. But then they also have much stronger laws protecting tenants. Short Assured Tenancies are evil.

“treadmill”

Mortgage rates drop off significantly as soon as the bank is insulated from taking a loss by your principle payment, in the case of a liquidation event (especially in the case of a market downturn). So however much gets you to the lower rates. 10 to 20%, usually.

It depends. Personally I’m not touching this rather inflated currently-on-the-brink housing market.

That was likely a one-time deal. Do you think it’s possible for that sort of growth to keep going on forever?

It is not that simple. Your mortgage agreement will prevent this. To do this legally you need a Buy-to-Let mortgage, which operates quite differently (based on yield, not your salary).


(Matt) #43

You’re just being negative for the sake of wanting to keep your argument alive. The reality is that not enough housing has been created since the 70’s in the UK, hence why housing prices rise between 5 - 15% on average per quarter since the mid 1950’s. Unless an apocalyptic event occurs (Brexit + Corbyn + Small Pox) would enough housing free up that would devalue the housing market.