Saving for a house-advice please!

secretsanta_2

Hi all,

I’ve just moved back to my parents house after splitting with my long term partner of 12 years,I am 34.We were not married and we didn’t have children so financially we are no longer tied at all. I have just over £6000 in savings and due to the minimal amount I pay to now live at my parents it is likely I can save about £800/£900 a month. The only debt I have is a credit card which currently has a balance of £2500. I am looking to get a car eventually but not right now and my main priority is to save as much as I can and use living with my parents as a great platform to do this. Should I clear the credit card first? (It currently does not create interest) and how should I move forward with my savings? I don’t feel comfortable with putting all monies into a LISA or help to but isa as the thought of limited access concerns me for some reason and as I’m on my own on an income below £25,000 it will be some time before I will have enough to even begin to buy a property. I would appreciate any useful or helpful advice 

SameOldRoundabout

Savings in our house are generally split. I put 50% into a current account for house renovations, 25% into an emergency fund and 25% into paying off credit cards/overpaying the mortgage. You could consider a split, say 25% on clearing the card (which you can use for fuel or something and pay in full every month), 50% into a LISA or similar and 25% into a savings account you have unlimited access to?  A small credit card balance won’t make a huge difference come application time but obviously if you can lower the balance a fair bit it looks better, especially if that £2500 is near the credit limit. 

jemima82

Where do you live/ what is the likely price of a property you’d be looking to buy? I would always say pay the credit card off first, there’s no benefit to being in debt.
The LISA bonus is hard to argue against if you are definitely going to buy a house. It’s only tied in for a year from the date of opening the ISA. Personally I would put £4K to a LISA before the end of this tax year and put the rest of your savings towards the credit card. Then with your savings each month, clear the remainder of the card and keep putting in to the LISA in the next tax year up to £4K. I’m a year’s time you’ll have £8k plus £2k bonus plus anything else saved, and no debt.

MovingForwards

When are you looking to buy?
How much deposit do you need?
How much are legals, mortgage fees, broker fees, stamp duty?

Then work backwards.

If you are a FTB, and it will be more than a year before you start looking, get the LISA up and running as it's free money.

Then find some accounts with decent interest rates, look at regular savings accounts like the Coventry etc, it all helps towards your deposit and fees.

H2B ISA has now closed to new savers.

There is the option of H2B loan, for a little while. But that has its pitfalls, as does shared ownership.

diggingdude

If you can save 8 to £900 a month surely maxing out a lifetime ISA is a definite? It would still leave you plenty of money to look at debt and putting other money aside

steampowered

If you think that you will want to buy a property in the next few years which qualifies for the 25% bonus under the Lifetime ISA, it makes sense to maximise that. 

Otherwise you could consider a stocks & shares ISA, if you think you likely to be investing for at least a few years. There is some risk but that is likely to generate the best returns.

Otherwise you could consider cash savings.

It's not necessary to pay off a 0% credit card immediately, but you should plan to pay it off before paying any interest.