Saving for a house deposit - best savings route?

twotonealex

Afternoon All,

I've posted in this section previously regarding pensions and general investments, but want an opinion on my savings plan.

I've got a decent spreadsheet of savings amounts, compound interest etc, but I won't bore you all with it!

As of January myself and my partner will be in a situation where we can start saving £1500 per month between us, increasing up to £1900 over the next few years + any bonuses/pay rises/increases in salary. We are planning on buying somewhere around June 2022 (3 years 7 months away)

Incorporating interest, we want to save minimum £85K, which after doing the maths, is possible. Based on our current salaries we can borrow around £300K, anticipating this to grow depending on promotions etc. Taking into account stamp duty, we would like to save enough to buy £375K or more, ideally closer to £400K but baby steps!:beer:

Naturally, I want to take advantage of the best savings accounts possible, and in order to maximise it all I'm planning on opening a shed load of regular savers each year between us and maxing them out (unless decent interest is available elsewhere). Based on the current rates online and in building societies near us, I'm aiming for a rate of 2.5% at the lowest, aiming for 3% average.

Once each 12 month saver matures, I will move the excess into the best bonds or savings I can get.

My partner is on a mortgage with her parents (for where we currently live) so unfortunately is not a first time buyer. I've opened a LISA and we've maxed out the £4K deposit limit for this FY.

We are being gifted with £10K as a wedding gift towards a house, however this won't be provided until we actually are at the point of buying (so no interest on this). This £10K is taken into account in my earlier target amounts.

I've got a 123 account but the rates obviously dropped, I've had a Nationwide Flexdirect previously so not eligible. Basically most interest paying current accounts I've already had!

I appreciate this will require a decent amount of house keeping to open/close savers each year, but we need to get every penny of interest possible.

The question is, are multiple regular savers and the route described above the best option?
Is there anything better I can do?

Cheers all!

Plus

My strategy is something like this:

- a 'good' interest-paying current account that can be used for cycling money around other accounts. SOs for regular savers etc come out of this.
- as many regular savers as you can achieve, opened at different times of year so that you can recycle the maturity proceeds from one into the payments into the next
- other interest paying current accounts (gradually winding these down as they become less attractive) - some of these are prerequisites for the RS accounts
- top slicing RS maturities into LISA and ISA in April
- an easy access savings account so you can ping spare cash from the current account until it's needed. Main thing is ease of faster payments to and from current account.

How complicated it gets depends on how many RS accounts you have - if you have too many it's easy to get 'boom and bust', where you have a big lump of payments going out, and then suddenly they all mature and you have lots of spare cash.

Wildsound

I would open a HTB ISA also at the best rate (currently Barclays at 2.58%). This is basically a monthly saver, only better in that the interest compounds for as long as you have the account open (in your case, it sounds like several years).

You are permitted to have this AS WELL as the LISA, but when the time comes to buy the house, you can only claim the bonus on one of the accounts. Not a problem though as you can just close the HTB ISA (at no penalty) and pocket the interest, whilst using the LISA for the house purchase (thus not being hit by the exit penalty). The only downside to this is that you cannot open any other cash ISAs (unless you get a split ISA like Nationwides), but as you are chasing the highest paying accounts, you are highly unlikely to breach any personal savings allowances for tax purposes (assuming you're a basic rate tax payer), and also unlikely to be opening cash ISAs as these generally pay less than their non-ISA equivalents.

xylophone

My partner is on a mortgage with her parents (for where we currently live)

But the parents do not live there?

Will the property be sold when you move out, giving your partner a share of the equity to contribute to the purchase of your marital home?

twotonealex

Wildsound wrote: »

I would open a HTB ISA also at the best rate (currently Barclays at 2.58%). This is basically a monthly saver, only better in that the interest compounds for as long as you have the account open (in your case, it sounds like several years).

You are permitted to have this AS WELL as the LISA, but when the time comes to buy the house, you can only claim the bonus on one of the accounts. Not a problem though as you can just close the HTB ISA (at no penalty) and pocket the interest, whilst using the LISA for the house purchase (thus not being hit by the exit penalty). The only downside to this is that you cannot open any other cash ISAs (unless you get a split ISA like Nationwides), but as you are chasing the highest paying accounts, you are highly unlikely to breach any personal savings allowances for tax purposes (assuming you're a basic rate tax payer), and also unlikely to be opening cash ISAs as these generally pay less than their non-ISA equivalents.

Thanks for this thought, I hadn't really considered it due to the limit on the house purchase price, but along side the LISA works.

The only issue is the £200 a month after the initial £1200, it isn't very high, but then again the regular savers aren't much higher so it would be good account to feed the matured funds into.

Thanks for the suggestion!

twotonealex

xylophone wrote: »

But the parents do not live there?

Will the property be sold when you move out, giving your partner a share of the equity to contribute to the purchase of your marital home?

Hey Xylophone,

Her parents bought it as a long term growth investment, it's just us two that live there, not her parents.

Her parents will sell it prior to us buying a house/take my partner off the mortgage and sell if not long after we buy a house, however we will not receive proceeds from the sale either way.

The £10K we are being gifted as a wedding present will be prior to the sale of their property we live in, and will not be associated with the sale of it.

Have you thought of something I haven't considered? :beer:

twotonealex

xylophone wrote: »

But the parents do not live there?

Will the property be sold when you move out, giving your partner a share of the equity to contribute to the purchase of your marital home?

An additional note, my partner owns no share in her parent's property we live in, and was just on the mortgage for 'affordability'. She could be removed at any time if needed! Basically - on the mortgage but not on the deed.

I'm hoping this makes a positive difference?

xylophone

Her parents will sell it prior to us buying a house/take my partner off the mortgage and sell if not long after we buy a house, however we will not receive proceeds from the sale either way.

Hang on a minute! Your partner is a party to the mortgage?

How is the property owned (joint owners/tenants -in-common)?

Have you checked the Land Registry?

twotonealex

xylophone wrote: »

Hang on a minute! Your partner is a party to the mortgage?

How is the property owned (joint owners/tenants -in-common)?

Have you checked the Land Registry?

Okay so - (bare with me!)

Her parents put down a deposit on this property to buy as a long term investment. They fronted the cash for deposit, the apartment is in her Dad's name, the mortgage is in both my partner and her dad's names.

So owned solely by her father, she's just on the mortgage for affordability.
We live there with no rental agreement, just pay a nominal amount each month, to her parents who pay the rest of the mortgage.

I'm not too hot on this so I apologise.

xylophone

Okay so - (bare with me!)

Cheeky! I'll pass if you don't mind!:)

Are you certain that your partner is not named as a joint proprietor on the deeds of the property?

If not, how can she be said to have bought anything?

just pay a nominal amount each month, to her parents who pay the rest of the mortgage.

If her father is the sole proprietor and this money is in respect of her occupancy of the property then she is paying her father rent and he should be declaring it as such?

And you cannot just remove a person from the mortgage - presumably she is jointly and severally liable and the mortgage company would wish to be assured that the father could afford the mortgage on his own/require him to remortgage?

I think you should look into the situation and take some advice from a solicitor.

twotonealex

xylophone wrote: »

Cheeky! I'll pass if you don't mind!:)

Are you certain that your partner is not named as a joint proprietor on the deeds of the property?

If not, how can she be said to have bought anything?

If her father is the sole proprietor and this money is in respect of her occupancy of the property then she is paying her father rent and he should be declaring it as such?

And you cannot just remove a person from the mortgage - presumably she is jointly and severally liable and the mortgage company would wish to be assured that the father could afford the mortgage on his own/require him to remortgage?

I think you should look into the situation and take some advice from a solicitor.

Apologies for the slip!

I will double check and confirm back!

I appreciate it isn't as simple as just removing her from the mortgage, but thankfully from an affordability perspective he would be able to afford the repayments.

I will come back to you

Thanks for your help!

:beer: