Have some Savings, looking to Buy my 1st Home (Advice Needed)

DoubleMaximum

Hi all,

Long time viewer, first time poster in these Forums

Looking for some Advice as I'm in a position where I've saved up over the past several years (around £10,000) and looking at options into owning my first Home.

I'm 35, work at a good job that pays relatively well, no kids/partners/dependents or any Cars/other ownerships - and looking to buy in London at some point in the next 2-3 years (optimisitcally) and I can save around £300-£400+ per month

I've been looking at Help to Buy ISAs and Lifetime ISAs from Natwest - primarily only as I bank with them - but the Saving amounts for the H2B are quite small in comparision and considering a LISA. I'm not sure on next steps and not keen on Investing as truthfully I don't know much about it and not sure the rewards outweigh the risks.

Any advice anyone recommends would be appreciated, I have limited Financial knowledge in this area (I don't know many who have bought a property) so appreciate any and all info on people who have done this before

Thanks in advance

moneysavinghero

You can invest in a LISA on a standard savings account basis, so not investing in anything risky, your money would be secure. You won't get great interest rates but at least you would be getting the LISA bonus.

grumiofoundation

If you do not already have a help to buy ISA that avenue is closed off as the scheme is closed to new applicants.

Natwest do not offer a lifetime ISA. You don't have to open an investment (stocks and shares) lifetime ISA, you can open a cash lifetime ISA (would generally be seen as more sensible for house deposit money anyway). See link below - best (in terms of interest) providers are moneybox/nottingham BS.
https://www.moneysavingexpert.com/savings/lifetime-isas/

Key thing to do is read up on the LISA scheme and understand limitations/penalties (and then decide if suitable):

Max. contribution £4,000 per tax year. 
Government tops up by 25% (so max. bonus of £1,000 per tax year).
LISA can be used for property purchase of £450,000 (would this be an issue - you say looking to buy in London?)
LISA has to be open for 12 months before you can use for house purchase. So by this time next year you could have paid in £8,000 (since tax year Apr-Apr).
If money withdrawn for anything other that property purchase (or retirement) then you have to pay a penalty which is more than the bonus received - not not suitable for money that you might need to access not for property purchase (or retirement). 

DoubleMaximum

That's very helpful, thank you - I'd forgotten the H2B ISA has closed (it's still advertised on their website but when you go into it it says new accounts are closed, D'oh) and if the LISA limit is only up to £450,000 would be an issue as that is too low in London at the moment. I was thinking a Fixed Rate ISA too but Interest Rates seems quite low.

eskbanker

DoubleMaximum said:

I'm in a position where I've saved up over the past several years (around £10,000) and looking at options into owning my first Home.

I'm 35, work at a good job that pays relatively well, no kids/partners/dependents or any Cars/other ownerships - and looking to buy in London at some point in the next 2-3 years (optimisitcally) and I can save around £300-£400+ per month

DoubleMaximum said:

if the LISA limit is only up to £450,000 would be an issue as that is too low in London at the moment.

You may need to reset your expectations if you plan to buy a first property for over £450K but have only managed to accumulate £10K of savings from a well-paid job over several years without any family/car costs, even if you anticipate doubling that over the next few years.  Even at current prices, what property value are you expecting to pay, and how much of a deposit do you anticipate accumulating?

DoubleMaximum

^Fair enough, it's only recently but looking at ways to save more over the coming years - indeed I am aiming a bit too high the more I look into it, especially as the ideal is at some point I can save around 5% for a Deposit (£100-200k)...

kidmugsy

moneysavinghero said:

You can invest in a LISA on a standard savings account basis, so not investing in anything risky, your money would be secure. You won't get great interest rates but at least you would be getting the LISA bonus.

Seconded!  Indeed it might be attractive to move much of the £10k capital into a LISA as soon as poss (i.e. £8k by 06/04/2022) while putting the monthly savings into a monthly saver - they often pay better than ordinary savings accounts.

moneysavinghero

DoubleMaximum said:

^Fair enough, it's only recently but looking at ways to save more over the coming years - indeed I am aiming a bit too high the more I look into it, especially as the ideal is at some point I can save around 5% for a Deposit (£100-200k)...

A 200k 5% deposit would mean a property value of £4million. £2million for a  100k 5% deposit.
That would require a salary of about £845,000pa to be accepted for the mortgage. If you are earning that much why can you only save £400pm. 

And at £400pm it would take you 42 years to save up a £200k deposit. At which point you would most likely have retired.

I think you need to have another look at your sums.

grumiofoundation

DoubleMaximum said:

^Fair enough, it's only recently but looking at ways to save more over the coming years - indeed I am aiming a bit too high the more I look into it, especially as the ideal is at some point I can save around 5% for a Deposit (£100-200k)...

You have 5% of 200k now. 

DoubleMaximum

Thank you all, got my sums wrong evidently!