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


(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) #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.


r/UKPersonalFinance updated Flowchart
#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”:


(Brenda Wong) #21

omg this is amazing. You’re an absolute star for making this list thank you!


#22

Oh, one more thing: Keep in mind that deposit is only one thing. What I found harder is to find a property that is less than 5 times annual income around Greater London, as that’s the absolute maximum any bank is going to lend you…

Assuming an income of 40k + deposit of 60k: Your maximum budget for your house is going to be 5*40k+60k = £260k. Not much there in London - and you need to consider legal fees, stamp duty, etc as well :frowning:


#23

I would recommend trying to get a side job or freelance gig in addition to your main job. The advantage of that is that it feels like “free money” as all of that money (besides taxes of course) can go towards your savings in an interest-bearing account or ISA.

In software projects it’s easy to get ~5k/month gigs and most can be done remotely & part time, so it’s quite a nice bit of extra cash.

Credit cards & history

For credit cards I suggest having one and using it regularly every month up to 50% of its limit more or less, then paying it off in full after the statement was generated (you have to let the legacy rust notice your usage, otherwise they’ll keep reporting your balance as 0 to CRAs).

Get a copy of your credit report from the 3 main CRAs (you’re entitled to one free report per year as per the law), see if anything looks out of place. You can also sign up for free credit monitoring services such as Noddle but be careful to read their privacy policy, as a lot of them make their profits on shilling predatory scams (payday loans, etc) especially if you have bad credit. Consider signing up with a burner email address & phone to avoid their spam.

Close any old accounts that include credit & overdraft if you don’t need them, as lenders might deny you of further credit if they see that you already have “enough” (even if you completely forgot about those accounts and don’t use them).

If you aren’t already, get on the electoral roll; it’s a small signal but helps reassure lenders your address is valid. You can sign up online - make sure you don’t agree to be on the “open” (publicly available) register unless you like spam & scams.

Finally, don’t worry too much about it, credit reports are a dark science and while I see some people religiously taking care of it, I am not sure they end up in a better position compared to someone that doesn’t even think about it (but always pays the bills on time). At the end of the day the main objective of credit reports is to weed out bad payers - as long as you’re not one of them you should be good to go. I am not convinced that worrying about an account not being on all 3 CRAs or about account lifetime is justified, especially for mortgages where there’s a lot of manual review (as opposed to “computer says no”).

Things not to do

Lookup my Monzo account on the customer service tool and use it as an example of what not to do. :joy:

As a start I’d recommend not saying “It’s Monzo time!” every time you get paid and going to the pub or shopping to spend it all. :joy::joy:

Finally I’d say, do you actually want a house, and why? I see it as a huge liability - I very much value my freedom of moving around any time I want and not having to worry about selling it, etc. If you’re just falling for the “renting is throwing money away” BS, I suggest you read this.


Do You Have More Than One Bank Account?
#24

Yes there seemed to be some quite strong opposition to even asking that question in the other thread so it just died. I was going to bump it the other day but couldn’t face defending why I thought it was important.

I don’t need Monzo to comment on the criteria of every lender, I need to know if it effects any lender at all because it might reduce my already slim pickings.

We don’t need an extended discussion here as a thread already exists but it’s concerning that there isn’t much information available and it could have a big impact.


#25

Landlords, that’s why I want a house. A few of the houses in my estate(Bedfordshire not London) are rented and the landlords seem to up the rent, without real reason. Have a revolving door of tennants (a new tennant every year it seems for most of them) and seem generally uninterested in upkeep of the properties mostly due to the fact they have about 5 different properties and don’t bother to look after them all. I’d rather not deal with that and just own my house/land. If I move to somewhere else, then sell up and buy elsewhere. Then again I don’t feel the need to relocate from south east England so my situation is different to yours :slight_smile:


(Jack) #26

It’s worth spending an hour or so every year to make sure you’re on the cheapest plans possible for services you require like:

  • gas
  • electric
  • mobile phone (if you like you handset and your contract has ended. Switch to sim only).
  • car insurance
  • Broadband / TV
  • house insurance etc

It’s easy to presume you got a good deal when you signed up but often after the first 12 months this isn’t often the case. Especially if you just renew. Check out other companies or even what you’d get charged for signing up again as a new customer (I saved over £200 doing this alone).
Checking these things only takes a few mins each if you use good comparison website etc. You can easily save a few £100 in a matter of mins which can easily go towards that deposit!
Again as others have posted above the MSE (Money MakeOver) site can help a lot with this although it does got a bit overboard in places. Do the main items first and work your way down the list. It’s all down to how granular you want to be. The site has lots of tips on money saving.


#27

Yeah. They can be a pain. I have to say: Over the years, I have rented only two properties, and in both cases the landlords were brilliant. Yes, they increased the rent every year, but by a reasonable amount, and they provided serious value for money in taking care the flats were kept in good order. But stories I have heard from less fortunate friends make me weep …

Anyways, I think it’s a good exercise to ask this question, as too many just assume it as a default position without really considering the pros and cons, when renting is a totally valid for some. Incidentally, I was opposed to owning a house for a long time (probably due to my good experiences), but once family comes into play the whole situation changes drastically …


#28

Watch out for mobile & home broadband contracts though - they are often a scam to keep you once you realise how bad their service is. I always recommend 30-day rolling contracts instead so you can run away as soon as they turn to shit (or if a competitor suddenly starts innovating and you need that new feature of theirs).