5 years to save £60k, how?!

first98

Thrugelmir wrote: »

What's the rate of interest on your mortgage?

My mortgage rate is 2.15% at the moment for the next 5 years.

first98

Thank you everyone for your replies, really do appreciate the help.
I'll get looking into everyday savings accounts and crack on with the opening of them. I guess the benefit of those also is that we can both pay into then rather than having separate ISA's.

Regarding pay increases, I expect my salary to rise to just under £45000 within the next 2 years however with overtime that'll take me over the limit into the higher tax payer bracket.


"A good way to improve your savings capacity is not to spend too much of your income in the first place" - I allocate myself to spend £800 per month, this is for food at work and petrol. This week I've only spent £100 of that and most months I'm spending less than that anyway so throw that into savings as an extra. Once we are settled in and have stabilised out outgoings, it'll be a lot easier to see how much exactly we can save each month.

kidmugsy

first98 wrote: »

Regarding pay increases, I expect my salary to rise to just under £45000 within the next 2 years however with overtime that'll take me over the limit into the higher tax payer bracket.

Then it'll be time to make just enough of a pension contribution to avoid the 40% tax. Such joy!

mije1983

first98 wrote: »

I'll get looking into everyday savings accounts and crack on with the opening of them.

Look at regular savers as mentioned as well. They do have a monthly pay in ceiling (from £200-£400 depending on provider) but they give a much better interest rate than normal savings accounts.

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts

jimjames

first98 wrote: »

Thank you everyone for your replies, really do appreciate the help.
I'll get looking into everyday savings accounts and crack on with the opening of them. I guess the benefit of those also is that we can both pay into then rather than having separate ISA's.

Everyday saver accounts wouldn't be a good idea as they pay such poor rates. Look for Regular saver accounts instead that pay up to 5%

fiisch

On HTB, the house price is likely to increase so if the house is worth £300k now, with your 20% worth £60k, it'll likely be at least 1.5x greater by the end of the 5 years, depending on whereabouts you live. You can also remortgage to pay off the equity loan, so given the likely increase in equity and improved Loan-To-Value, the increased monthly payments will likely be a lot more palatable than they seem now.

We are 2.5 years into a HTB (our second property we have purchased on this basis), but our focus has been to overpay the mortgage as much as possible. When the 5 years is up, assuming we're not in a position to move up the property ladder again, we'll remortgage to clear the 20%.

To give you an illustration, our 20% government stake was £70k when we moved in. Two and a half years later, that's already grown to £90k and climbing, but admittedly we're in the rip-off South East!

first98

fiisch wrote: »

On HTB, the house price is likely to increase so if the house is worth £300k now, with your 20% worth £60k, it'll likely be at least 1.5x greater by the end of the 5 years, depending on whereabouts you live. You can also remortgage to pay off the equity loan, so given the likely increase in equity and improved Loan-To-Value, the increased monthly payments will likely be a lot more palatable than they seem now.

We are 2.5 years into a HTB (our second property we have purchased on this basis), but our focus has been to overpay the mortgage as much as possible. When the 5 years is up, assuming we're not in a position to move up the property ladder again, we'll remortgage to clear the 20%.

To give you an illustration, our 20% government stake was £70k when we moved in. Two and a half years later, that's already grown to £90k and climbing, but admittedly we're in the rip-off South East!

I am in the exact same boat as you. I've bought a flat for £335k, I'm yet to apply for mortgage but the time is coming soon. Should I take the 15% and get a larger mortgage or 20% from the government? I'm assuming the 15% would be better as it's less to pay back to the government.

I am looking to remortgage the flat after the 5 years before the interest starts to buy them out of it completely so could overpay the mortgage so we've got room to remortgage, obviously the house price is going to rise so LTV will be lower too (I hope).

I also live in the South East, flat has been bought in Surrey.

fiisch

first98 wrote: »

I am in the exact same boat as you. I've bought a flat for £335k, I'm yet to apply for mortgage but the time is coming soon. Should I take the 15% and get a larger mortgage or 20% from the government? I'm assuming the 15% would be better as it's less to pay back to the government.

I am looking to remortgage the flat after the 5 years before the interest starts to buy them out of it completely so could overpay the mortgage so we've got room to remortgage, obviously the house price is going to rise so LTV will be lower too (I hope).

I also live in the South East, flat has been bought in Surrey.

It depends what you think house prices are going to do... If you think they're going to continue to rise (probably over a 5 year spell), then taking a big stake by virtue of a bigger mortgage is the more sensible option. However, if that leaves you struggling to meet the mortgage payments, then it may be a case of biting off less to start with.


Personally, I would always go with a bigger equity stake if I could afford it, but without leaving myself short - it's personal preference.


Something else to consider is the company that administers the HTB can be utter ****ers! We sold our first flat for £230k for a new build house. As we were moving into a new build, there was a lag time of 6 months between accepting the offer and completion. By the time we had completed and got the valuation (the valuation for 20% calculation purposes must be done within 3 months of completion), we ended up repaying £48k - i.e.: £2k more than 20%! It seemed unfair but I got nowhere with my protests, and I guess we still benefitted from the HTB.


By contrast, some friends were offered a 25% discount on the 20% if they sold their property early, so ended up paying 15% and saving a hefty chunk! They were offered this out the blue as the particular administrator was looking to release funds. They were in the fortunate position of being able to sell very quickly as they had a brother who had won the EuroMillions Lottery - some people get all the luck!!


I digress, but basically HTB is an excellent scheme to get you started, but you're sacrificing capital gains which could delay you climbing up the ladder, so for my money I always try and own the biggest stake possible. Given the HTB limit (£600k) and that we are now entering our 30s, this will be the last property on which we use HTB, and after our last experience I won't attempt to repay the equity loan at the same time as selling - will remortgage/repay first, even if it is just a year before moving.

Terry_Towelling

You are doing well with nailing your expenditure to the floor - keep going, but don't get too bogged down with saving to forget how to enjoy life.

I don't know much about how the property market will move in the SE (some would say I don't know much about anything) but with Brexit looming and the changes that this might bring to migration and housing demand in the popular SE corner, the housing market there may not rise as much as we all expect (if at all) - but I'm only speculating.

It may not be a good thing to rely on overtime as a source of income - it may not always be available - but it is wise to consider the impact that may have on your basic-rate tax status. As suggested, upping your pension contributions may help.

As for mortgages, it isn't always about the rate you have to pay, it's also about the size/longevity of the debt and the psychological impact it has - especially if housing values fall. As long as you have a reserve of cash to cover serious issues like job loss and periods of serious illness I think it is a good idea to reduce mortgage debt as much as you can.

Don't forget, no one knows the future but you cannot take for granted that your capacity to earn and save at any given rate will continue for as long as you would like - I speak from experience and was glad to have shed the mortgage before the gods decided to open their bowels on me and my better half.