How to Save to Buy a House

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Home ownership for first time buyers can be a daunting prospect so this is a little bit about how frugal living can help you save to buy a house, or even save to rent to buy a house! The lifestyle affords the luxury of saving more of your cash for your dream home.

 

When I first began my quest to save for a house it was 'the done thing' – we were led to believe there were 3 options –

• get a mortgage
• get a council house
• find a live-in job

Initially, I opted for the live-in job. Looking back, it was possibly the best paid job I ever had – all bills, meals and car paid AND £40 a week into the bank. But at 18 you don't think about it until you need to move on and set up your own home.

And so the master plan began - only I got impatient and wanted an item that cost more than my savings, so I got a bank loan to pay for it! The loan was only £800 repayable over 12 months but getting it became a defining moment. It taught me, rightly or wrongly, that the easiest way to buy something major is to use someone else's money and pay it back over time, preferably with as little interest added on as possible. It all seemed so easy until interest rates rose to an incredible 15%, that's when things can go pear-shaped. It certainly taught many of us why we should pay more attention to financial and property-related news!

Since then, various Government initiatives have evolved and different home ownership possibilities introduced. There are affordable rent options, social housing, shared ownership and even social enterprises that incorporate housing.

Gentoo Group is one such social enterprise, based in North East of England, with "a vision to improve the Art of Living."

Their work is focused around three key areas to maximise impact: people, planet and property. They allow you to find a property you like, move in and pay rent, as a tenant, but your payments can also contribute towards buying the house – no need for a huge deposit or even a mortgage!

Social enterprises help further increase your chances of getting onto the property ladder and I suspect that this route may provide solutions to those who would, otherwise, have little possibility of ever owning their own home.

Long gone are the days of my three basic options and total exclusion from the property market if you find yourself with insufficient income to qualify for a mortgage. Now we also have:

• Help to Buy - Government backed scheme for first time buyers offering tax-free top-ups to mortgage deposit savings.
• Shared ownership - You can buy shares worth between 50% and 75% of the market value of the property and you pay rent on the remaining share.
• Rent to buy - 'Genie' properties are let at rates slightly above those of social tenancies, but they are still considerably below current market rents. Of course, due to their popularity they are allocated on a ‘first come, first served’ basis and on an Assured Shorthold Tenancy agreement.
• Part exchange - A bit like trading in your old car for a bigger or better one, you could start small and then work up to your dream home.

  

Whichever route you choose, you need savings to cover your costs. Most property transactions involve some form of legal fees, possibly surveys, moving costs, initial décor, floor coverings and furnishings and then all the little things that can be overlooked, especially if you are starting from scratch. Granny's insistence on starting a 'bottom drawer' as early as possible is as relevant now as it has ever been.

Take care of the pennies, don't spend the pounds foolishly, take advantage of meaningful bargains and bank your savings safely so they can't be frittered away on 'stuff'. Try to ensure your money is attracting the best possible interest, even when rates seem ridiculously low, and be prepared to move quickly if your dream home presents itself.

A LITTLE BIT EXTRA

To help me with my own savings plan, I charted a timeline. It began with house hunting, then progressed through house viewing, surveys, moving costs and then on to legal expenses. It wasn't until all of those costs, which were several thousand pounds, could be met that I started saving for the actual house! Each month the balance grew with tax-free ISA interest, I rounded it up to the nearest full pound. Pound-rounding became quite habit-forming, so it wasn't long before I was rounding up to the nearest £5, then the nearest £10, until it eventually got to the hundreds. It all took time. Social enterprise options could definitely provide many with far quicker results and it is something I fully intend to explore further. How about you?

Feel free to ask questions, comment, get involved in the frugal forums discussions or share these posts and good luck with your personal savings goals.

Inside a Tiny House

Inside a Tiny House

Have you ever wondered what the inside of a tiny house looks like?

Wonder no more!

NYK has managed to meet up with Mark and Jen from TinyHouseUK and fully investigate what tiny houses are really like…

I love them!

Read all about it and see the photos here

Counting the Costs of an Unplanned Housemove

Number-cruching is usually fun, much more so when you don't have any debt to worry about. However, our own current situation of having been served two months notice to quit the house got me wondering how others would or could cope.

I consider myself fortunate to be in a situation where we freely chose to rent a fairly cheap, slightly neglected property in order to afford to save towards buying our own place. But what if we'd had debt? What if we didn't have the wherewithal to save and were now faced with the unenviable situation of having to move the entire household elsewhere on a budget of absolutely nothing and within a tight timescale?

Homelessness IS a situation that can be forced upon anyone relying on privately rented property for no good reason other than the landlord wants their property vacated. They'll find a reason or an excuse. Similarly, it is a situation faced by many mortgage holders in the event of sudden job losses, interest rate hikes, sickness, a death in the family or unserviceable debts.

We do have a homeless problem within the UK, whether we all acknowledge it or not, and it's not just reserved for those with drink or drug related problems.  There is a genuine need for housing, a genuine need for safeguarding existing tenants and home owners and a genuine need for employing radical measures to protect against future changes to circumstances that are within human control. The population just keeps on growing while the availability of housing cannot keep pace. No amount of money will buy living space on this once great island once all the land has gone.

So, you're facing the real possibility of being made homeless...

First of all - don't panic! Easier said than done, but there's no point wasting energy on it as the outcome will remain the same - you will need to find another house and move home within a short space of time. Landlords are perfectly within their rights to serve as little as two weeks' notice, depending on your tenancy agreement or if you breached the terms of your lease so, in that respect, our personal situation is fortunate.

If you are of a disposition that things could really get you down and you feel there's no place else to turn, there's always The Samaritans who are there to help all. If you simply need a little bit of cheering up in the wake of an otherwise gloomy situation, or for a bit of light-hearted banter, feel free to join us online in our Frugaldom Forums, where there are always others to share your plight. Our frugal ways and regular catastrophes may well help to make you feel a little bit more 'normal'.

If you have debt and have been struggling to meet your financial commitments, there are agencies you can contact free of charge. Citizens' Advice is one, CCCS for free debt help is another and, in the case of housing, we've found plenty of helpful advice on our local community action centre hub. Contact your local council to find out if there's one in your area or try searching online. For us, we have the Nithsdale Council of Voluntary Services with Dumfries & Galloway Voluntary Action.

As private tenants, you may want to look at your options for applying for social housing or to local housing associations. And then there is the power of social media - our old friends the forums, blogs, websites, Facebook, Twitter or any other broadcast platform. Don't be afraid to shout out for help when help is needed. Just be careful of what you say and how you word it, as it is unbelievably easy to offend others. Trust me, I have first hand experiece of that!

Finding your next house deposit while not knowing when (or even if) your existing landlord will refund your current deposit can be unnerving. There is a Tenant Deposit Protection scheme in place in England & Wales:  we haven't been made aware of any such scheme becoming mandatory in Scotland, although it is reported to be implemented in future.

When leaving your current home, always ensure you either

a) Leave the property exactly as you found it or
b) Have an agreement with your landlords regarding any reimbursement for improvements you have made to their property at your own expense.

I would highly recommend that any and all relevant conversations and agreements with any landlord be recorded in writing, signed and witnessed for future reference. It prevents any unneccessary disagreements when one or other party could very easily renege on their word at any time in the future. Man's word is not always his bond; sadly, that is one mightily important lesson we have recently learned.

Here, in Scotland, we have what is known as Landlord Registration, whereby all landlords must be registered. It is illegal for anyone to let out any property to any tenant without first being registered as a landlord through their local council; failure to do so can result in fines of thousands of pounds. You can check to find out if your landlord (or any other landlord in Scotland) is registered by completing the online information request or by telephoning your local council.

Landlords do have statutory obligations to their tenants, just as tenants have obligations to safeguard any rented property in their charge. Make sure you know your rights and the landlords' rights before you rent. These do not relate exclusively to private landlords. Housing associations and even council housing is governed by much the same thing. The only thing that seems to differ greatly is the reduced or Government subsidised rental costs for social housing.

There is a Rent Deposit Guarantee Scheme (RDGS) that operates in some regions. It enables people on low incomes and in housing need to access accommodation within the private rented sector. You can find more free online help from the CAB Advice Guide. This scheme is available in Scotland, although I suspect you'll need to be in receipt of some form of benefits in order to claim hardship. In the first instance, contact your local council to enquire into the existence of any such schemes in your area and don't forget what a great source of information your local library can be. Check out Shelter, which is a UK based charity dealing with housing and homelessness, they appear to have separate information for Scotland, England, Ireland and Wales. Even if you consider alternative types of accommodation, rather than regular bricks and mortar, Shelter should be able to offer free housing or homelessness information or advice.

Getting closer to the final moving date without having secured alternative accommodation can (and often does) place extra strain on any family, but I'm well informed that a landlord cannot simply make you homeless. In the unusual situation that they will not negotiate an extension to allow you time to find another place to stay, they must, by law, give proper notice between serving the original 'notice to quit' and any potential court proceedings. Before you MUST leave your home, your landlord MUST have done 3 things:

1. Served on you a Notice to Quit
2. Served on you an AT6 and
3. Obtained a Court Order

I believe the above to be true as pertaining to the Housing (Scotland) Act 1988, therefore I cannot be sure that legislation elsewhere is the same or similar. It's Government legislation and, as such, you can find out more about it here. On the other hand, you are free to request the return of your original deposit and turn in the keys to the property on the stated day, assuming you have someplace to go. You are also within your rights to seek independent legal advice and contest the landlord's intention to repossess your home. Help with legal costs may be available under any Legal Aid legislation.

I do hope that this blog helps someone and I fully intend keeping up with posting throughout the process of househunting and moving after being served Notice to Quit by our current landlord. I guess the most important thing in all of this, just like in any other dispute, is NEVER DO NOTHING. Take action immediately, seek appropriate help or advice and be prepared to make the necessary changes.

Don't forget that you are welcome to register and become a part of the free Frugaldom Forums, where everything frugal or moneysaving can be discussed - helpful information, chats with like-minded others, recipes, garden plans, self-sufficiency, hens, ducks, property, how to make ends meet... if it's about saving money, cutting costs, clearing debt, frugal living or working from home, you'll probably find it discussed in Frugaldom.