It was interesting to read that, for all the obsession us Brits have with becoming homeowners, just 64.8 per cent of the population own the roof over their head. This ratio puts us fourth from bottom compared to the other 27 EU countries, which is surprising when you consider that the attitudes to home ownership in most of them is more relaxed.
Of course, one of the main issues behind this is affordability, and the current housing crisis gripping the nation makes jumping onto the housing ladder anything but a given for families these days. But that doesn’t mean it’s impossible, and aside from diligent saving, there are some really useful ways that can help make you a homeowner quicker than you think.
Get on track for a mortgage
If you’re still going to be renting for the foreseeable future, one way to get in the good books of would-be mortgage providers is to start ‘practicing’ now. Let’s say for example you’re currently paying £500 in rent per month, but the properties you have in mind to buy one day are a bit of an upgrade. Start saving an extra couple hundreds of pounds every month on top of this to prove you’ll have what it takes to make your mortgage repayments with ease when the time comes. This will reflect well in your credit file, and strengthen your hand when sitting around the table with a mortgage provider.
A helping hand from ISAs
At the start of April, the new Help to Buy ISA went live, which is a bonus scheme from Government geared towards helping first-time buyers. Up to a maximum of £200 saved into this ISA each month, the state will top you up with a subsidy of 25 per cent (ie: up to £50 per month). That means that over a period of five years, if you save £12,000, you’ll get £3,000 of ‘free money’ when you make the deposit. Not only that, but as a couple, you are entitled to one Help to Buy ISA each, rather than one per household, which means you can further maximise this gain.
Next year, there will be a new Lifetime ISA as well, which has a similar bonus scheme attached to it. To a maximum of £4,000 per year saved into this account, Government will top you up with 25 per cent as well. Given that it is available to those between the ages of 18 and 50, that’s a potential £32,000 in bonuses if you’re lucky enough to be 18 years old when it launches! Nevertheless, for those of us who are a bit older, it’s still a great way to save, especially when you consider that funds are ring-fenced until you are 60 – unless you are using them to buy a first-time home.
Other ways of growing your money
If incremental saving is the way forward for you, then the above two kinds of ISA are a no brainer if your primary goal is home ownership. However, if you have a bulk in savings already, there might be better ways to put your money to use. Like most types of Cash ISA, the interest on the two types of account above will likely be poor, and it will also take you a long time to reap the full benefit of the 25 per cent matching bonus if you have to drip feed your money in.
Instead, peer-to-peer lending – where you lend your money directly to fellow consumers via an online platform – may be a better way to get from A to B. Returns are steadily between 5 to 6 per cent each year given the fact that there is no middleman like a bank, and this form of investment now has its own form of ISA, known as the Innovative Finance ISA, which makes it tax efficient. There are risks to consider with peer-to-peer lending, given that the borrower may not pay you back. But platforms tend to have sound measures to mitigate this, so it is worth considering.
No pain, no gain
It’s good to have a variety of options out there to help the cause, and there are viable shortcuts that you can take. But ultimately there is no better substitute than good old-fashioned saving. These are expensive times to be alive in this country, and our generation has it as tough as any in the quest to become homeowners. But it need not be an impossible dream, and when the time comes for you to make the plunge, being handed the keys – knowing how hard you have saved for your new abode – will surely be one of the most rewarding experiences of your life.
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