I'm 25 and I want to start saving for a house. Where do I start? 🏡


(Brenda Wong) #1

Beautiful and wise people! I’ve been thinking about this a lot lately, and trying to read up on as much as I can, but thought to take to the forum cos’ I know y’all have some good bits of advice I can use.

What are your best tips on saving to get a house? I’m looking specifically for advice on:

  • Ultra-powered budgeting tips
  • Credit cards and credit ratings
  • Things not to do
  • Legal shizzle everyone should be aware of but no one really knows about

edit: and if there’s something not in the list, please feel free to pop it here too! The more tips, da better.

Happy to share my personal context over DMs if necessary, but thought to get general advice first so that this is as helpful for everyone else as it is for me!

One more added factor: I’m looking to buy… In London. :scream:

Looking forward to being enlightened! :sunny:


(Callaghn Moseley) #2

I was wondering the same thing yesterday since I’m coming up to graduating from university. :mortar_board:

Not sure I can do much yet, as I’m still in the post-uni job search stage, but I’d be interested in having a rough idea about where I’m headed in terms of finances and the prospect of buying a house. :house_with_garden:


#3

So not one of the things you’ve listed for advice and also not particularly helpful for someone who is 25 but this is what I have been doing since I was 16 and now I am 20. Save as much as you can for a deposit as soon as possible, I started at 16 saving £200pm from my part time job at tesco and now at 20 save around £600 a month from my role as a software developer. Birthday money, christmas money, work bonus, money you have left over at the end of the month, save it all! (You can still go out and have fun if you budget correctly).

I now have enough (after 1 year full time and 2 years part time work before that) for a deposit on a small flat/house in the south east just outside of London(hertfordshire, bedfordshire, cambs etc) and hopefully in the next year or two will be able to obtain a mortgage and move out(new job, new salary etc). If you save religiously every month you feel bad not doing it and so you end up saving a lot of the course of a year (Currently Paying rent and can still afford to do this by budgeting correctly).

You want the latest iPhone or Macbook etc? Wait 3 months, see if you really want it and if you do, pay cash. That normally puts me off making expensive and impulse purchases which then means more money in my savings account and more money in my house fund.

So really the biggest advice I can give from my current situation is start as early as possible, save literally as much as you can without making your life boring and hellish. I understand people don’t think about things like this as early as me but it makes home ownership much more attainable


(Brenda Wong) #4

Oh my days, congratulations! What an incredible milestone, you must be super chuffed. I’ve been saving as much as I can since I started working, but in London it’s a hard slog, and had to get out of my overdraft first.

What are you looking to go into after uni?


(Brenda Wong) #5

It’s a good thing I’m not the kinda person who is obsessed with the latest gadgetry! I’m very much a buy-what-you-can-on-the-basics gal. Looks like you’ve been making some amazing progress!


#6

I struggle with not buying the latest gadgets but found that only paying for them in cash(debit card etc) really makes me more sensible with spending.


(Callaghn Moseley) #7

At the moment, I’m not sure. That’s one of the problems - I’m yet to find something that really grabs my interest. I’m looking at the world of finance, or public sector work. My degree doesn’t lend itself to any particular field, unless I want to become a translator.

Luckily I’m from London, so I’ll be moving back with the parentals while I save to move out. But I’m well aware of the challenges of the capital’s property market.

I totally feel like this topic is something which could be covered by Monzo University. Impartial advice and a product which has a focus on budgeting with the view to saving for a goal.

Money Saving Expert has something similar already (https://www.moneysavingexpert.com/mortgages/mortgage-guide), which talks about how mortgages work. But it doesn’t really talk about how to get to that stage.


#8

I was looking at options for the future and I like the idea of shared ownership schemes. Means a much smaller deposit and you can pay off the rented portion in 3 lump sums over the lifetime of the mortgage (scheme over there may vary slightly)


(Brenda Wong) #9

MSE - the real MVP, tbh :joy:

And also, yes! That’s such a great idea. Monzo University is already super useful, but I believe more content is going to be added soon :raised_hands:


(Brenda Wong) #10

My ex-housemate did this!


(Henry Pedro) #11

In terms of budgeting, unless youre in a very good job (£50k+) you’ll need a side gig (a hobby that pays or a second job). The money you make from your side gig plus what you’ll save from your normal job will turbo charged your savings for a deposit.

The more money you save the better the deal you can get (sorry if that seems obvious).


(Brenda Wong) #12

Alas, I earn less than half of that! A side hustle is definitely a good idea. Did you have a side hustle? What did you do?


(Caspar Aremi) #13

Definitely recommend https://UKPersonalFinance.reddit.com for loads of help and advice. They produce a great saving & planning flowchart, which someone posted here a while back and is how I first discovered the sub.


#14

There is one thing that made the biggest impact for us a few years ago when we started:

Seven years ago, we were a couple on a single income of under 30k in London with about 5k in savings. I’m sure it isn’t a surpise that we had to dip into our savings almost every month, just to pay our bills, and they went down to almost 0.

We realised this couldn’t go on like this (buying a house was far far off - not in our wildest dreams!) So we made a budget and stuck to it. In the first year, we just about managed to get even. Huge relief, I tell you!

Due to having successive pay rises over the next several years, and aggressively sticking to our budget (I had set up standing orders to put any money that wasn’t budgeted for into a “savings account” just after payday) we manged to save up enough money to buy a house just outside London last year. (Just to refute @DonPedro: Our combined houshold income was less than 50k until last year - when we had our mortage agreed it was just above 40k. We lived in London, at the time, now a family of four. It’s possible! You just have to be careful.)

Our budget did include overseas trips, going out, etc. But just being strict with yourself makes an amazing difference!

A few more specific things:

  • Savings:
    • Depending on your attitude to risk put your money into a mix of high interest savings accounts / ISAs / investements.
    • DON’T use interest-less pots. (seriously! You are throwing money away if you do!)
    • Consider getting a LISA or Help to Buy ISA, but research the pros and cons of each
    • Current accounts often pay higher interest rates (3-5%) than savings accounts (1-2%). Savings accounts usually pay more interest than ISAs (<1%), and if you are a basic rate tax payer your interest income is unlikely to be taxed anyway.
    • In short: At the current climate I don’t think ISAs are worth it, at least not for short-medium terms savings.
    • Regularly review any savings accounts you may have. Interest rates change, so put it in your diary at least once a year to check that you are really still getting a good deal!
  • Get cashback wherever you can: A cashback credit card, and a bank account that pays cashback. This is probably going to be a bit of a hard swallow for you, but have a look - I make almost £400 p.a. in cashback for stuff I do anyway.
  • By putting all my spending on credit cards, I can put my salary in an interest paying account from payday to credit card due date as well, thus gaining extra interest.
  • credit cards Use them wisely:
    • Make at least the minimum payment every month.
    • If at all possible pay off the full balance.
    • Don’t get cash advances.
    • In the 6 months before you apply for your mortgage consider not using them: Not having outstanding credit is positive.
    • Most importantly: Don’t use your credit card to buy stuff you didn’t budget for!!!
  • Credit ratings:
    • Get a copy of all three reports now. Gives you plenty of time to correct any errors that might be on there. And monitor them over the years to ensure no new errors crop up.
    • Make sure you have a current account that reports on all three CRAs (i.e. not Monzo) to ensure no lender thinks you don’t have a current account.
    • Don’t default on any payments (i.e. don’t be late to pay your utility bills etc)
    • If you are eligible make sure you are registered to vote.

Good luck!

[edit: I know: lots of MSE links. Loathe them or love them, they are a good starting point in my opinion, but don’t think I think MSE is perfect: Don’t take them as gospel - but if these concepts are foreign to you, these links can help you get started.]


(Kieran McCann ) #15

I’m definitely no expert here but I have been reading up on this myself.

A Lifetime ISA seems to be a good starting point.

You can save up to £4,000 a year in a LISA as a lump sum or by putting in cash when you can. The state will then add a 25% bonus on top. So if you save £1,000, you’ll have £1,250 and if you save the full £4,000, you’ll have £5,000. And that’s before interest or growth.


#16

Research, research, research. Do the maths to see what the maximum you are able to get as a mortgage. Consider a 95% mortgage or shared ownership scheme for new builds. Family. Don’t be afraid to say instead of a birthday or Christmas present, ask for cash. Hey I’m Oriental. We make it less vulgar by putting it in a red envelope!

The best advice I got from a friend was to buy the worst house in the best street you can afford.

You can always improve the house. You can’t necessarily improve the area, unless you know about future improvements, such as urban renewal, shops and businesses coming to the area, and really importantly, public transport links planned, e.g. Crossrail or bus routes.

Then it’s all about saving for that deposit, plus fees. e.g. stamp duty, legal, bank. But don’t forget setting aside cash for property refurbishments if it’s a fixer-upper. I just redecorated a rental home myself, because the management company quoted me close to £3,500 for painting the walls and woodwork. Cost of materials, and a week of my time = £156. I had no choice but to pay a professional for carpets which I shopped around and got for £800. With interest-free credit, it works out to be about £60 a month spread over 12 months. But I saved £180 by cutting up and disposing of the carpet and underlay, using a Stanley knife and a one hour Zipcar to the recycling centre.

Usual saving tips mean not so many holidays, making your own lunch, drinking the free drinks in the office instead of splashing out for coffee at Starbucks, walking wherever possible, timing your visits to the supermarket to pick up the discounted goods like bread and fresh food, collect your loyalty points. Don’t have to give up a social life, just moderate it, be it 2 for 1 pizzas, Easyjet flights booked three or four months in advance, etc.

Best of luck, Brenda. It will be worth it instead of being generation rent.


#17

I’m 28 and have my own place it was really tough and I’m not feeling the benefits just now but down the line hopefully… it’s disappointing when you’re forced to take in a tenant just to be able to afford to pay the mortgage, you don’t even have the place to yourself!

The biggest way I saved money in London was moving close to where my work was. I paid a bit more in rent but it was more than offset by saving in travel costs. It also let me go home for lunch which saves a lot too. If you work somewhere really fancy this may not be possible.

One question we never got answered on this forum was are there any issues to Monzo only reporting the current account to one agency?. We don’t know if this will cause issues or not with mortgage people. I’m probably stupid for worrying about it but it is nagging at me.

The main thing to be prepared for is that you have to be able to move quickly when you see something you like. It’s hard to do that when such large sums of money are involved. Sometimes an opportunity will arrive and you have to jump on it. I found out my selling agent had a target to reach by end of year and managed to negotiate a much better deal on the premise I could sort everything in only a couple of weeks. It was extremely stressful but I got lucky and had a good lawyer and the selling agent needed it done so they made their side of the paperwork happen very quickly.


(Henry Pedro) #18

Yeah, a few worked in at a cool bar in shoreditch at evenings and weekends. Every so often de-cluttered the house and sold stuff i no longer had need for (clothes and trainers mainly) on ebay

The cool thing is the surprise at the value some of the items went for on ebay


(Adam Robertson) #19

Interesting, I wasn’t aware of this. Can anyone at Monzo shed any light on this?


Monzo NOT On Credit Report
#20

See @Throwingspoon’s comment above, and the detailed discussion in the thread he links to (he’s put it as a question, and I’m not pretending to have a definitive answer, but I have no doubt in my mind that it will make an impact with some lenders, just as I have no doubt in my mind that it won’t make an impact with some other lenders, and I wouldn’t risk being refused a mortgage for something that silly, even if there was only an absolutely minute chance of that happening.):

As for “Monzo shedding light on this”: