FIRST-TIME buyers Fiona Barber and Johnathan Smith helped save towards their deposit by switching household bills and drastically slashing spending on food and nights out.
The Sheffield couple decided to buy their own home after living in an “old and damp” terraced house for four years, which they rented for £600 a month.
The couple hadn’t switched energy tariffs before, so they managed to save a massive £50 a month.
They knew they needed to make some big changes to their spending to kick-start their savings, so they started meal planning, batch cooking and cutting down on nights out.
This meant they could put away around £200 a month each – but still managed to celebrate birthdays and Christmases.
The 30-year-olds, who have a combined salary of £54,000, each opened a Help to Buy Isa to stash away the cash.
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In two and a half years, the couple saved £9,500 between them which was boosted by a 25% bonus when they withdrew the funds – giving them almost £12,000 in total.
Together with a £10,000 cash gift from Johnathan dad, they put down a 10% deposit of £18,750 to buy a £187,500 three-bedroom semi-detached house in Sheffield last year.
We caught up with Fiona and Johno, a marketing officer and process engineer, for The Sun’s My First Home series 15 months after they moved in.
Tell me about your home
It is a three bedroom semi-detached house built in the 1930s.
It has nice features like the original coving and a big bay window at the front. There is also a wood burner in the living room but we need to spend £300 to get it fixed.
There are French doors at the back which step out onto decking and then you walk down into the garden.
Because we are in Sheffield, the house is on a hill. It is a big garden, it’s 135 square metres.
When we moved in the weeds were seven foot high but we have trimmed it all back and built a patio at the bottom and a shed. We also built a raised bed where I am growing veggies.
Upstairs there is a small bathroom with a shower over the bath.
We completely redecorated this, we bought the materials and then hired someone to do the labour. Luckily we got it finished just before lockdown.
We are in the back bedroom which overlooks the hills and it has a double bed, bedside table, coat stand and wardrobe.
The front bedroom has the bay window and this is the spare room if we have anyone staying over.
We ripped out the fitted wardrobes to reconfigure the room and put wardrobes into the two alcoves on either side of the chimney breast.
There is also a small room which has enough space for a desk. I used it as an office during lockdown but now I just do my makeup there.
How much did you pay for it?
We paid £187,500 for the house, putting down a 10% deposit of £18,750.
We now have a five year fixed rate mortgage at 2.29% interest, across 35 years. The repayments are £595 a month.
They used to be £558 but we took a three month mortgage holiday when Johno was furloughed so the rate went up afterwards.
But it is still cheaper than the £600 a month we were paying on rent for a smaller house.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Why did you choose this house?
We looked at so many houses, more than 40. Through this process we realised what was important to us and a garden was a massive thing.
I had the sun app on my phone and at every property I would see where the sun would be at the end of the day when we finished work.
Location was also a massive thing for us. We wanted to be near shops, cafes and bars. The house is close to all of these but also really close to the Peak District.
How did you save for the deposit?
We started focusing on savings as much as possible towards the end of 2016 and we opened a Help to Buy Isa in February 2017 each.
The maximum we could put in a month was £200 each so that was our aim if we could, but we didn’t always meet that target and it was less around Christmas and birthdays.
We saved £9,500 between us in the Isas over two and half years and then got a £2,375 bonus. We saved the money by cutting back on our spending.
We have always shopped at Aldi but we started being even more frugal by doing meal plans and making lunch instead of buying it.
I would cook a batch of soup for the week and only treat myself to lunch out once a week whereas people I work with would eat out every day. This saved us about £50 a month.
We also didn’t buy any new furniture for our rented place which was only partly furnished.
We got a dining table from a charity shop for £10 and Johno’s mum gave us some furniture.
We also switched to a cheaper energy tariff.
It went from £115 to £65 in October 2017, meaning it saved us £50 a month so it made quite a difference.
We were definitely also more careful about going out. Before we were saving for a house we would say yes to everything.
But we changed so instead of going to the pub and going out in town afterwards we would go to the pub and then home.
That saved us money on more drinks and taxi fare, we saved around £100 a month each.
In the end we had just under £12,000 from the Isa and Johno’s dad gave him £10,000.
We used the remaining cash for the £2,675 fees for the survey, mortgage arrangement and solicitor.
I also had another £2,000 in a savings account from when I took my first job aged 16, so that was really helpful when we needed to redecorate and buy furniture.
What are the rules around cash gifts from family?
HAVING family boost your property deposit with a cash gift can come in handy – but there are some rules around it.
Anyone can gift up to £3,000 in any one tax year, and not have to pay inheritance tax (IHT).
If the whole £3,000 isn’t used in any single tax year, the balance can be carried forward to the next tax year.
So if you make no cash gifts in one tax year, you can give away a total of £6,000 in the next year.
But if the gift is larger than that and you want to make sure it’s tax-free, it’s important to plan when to make the donation.
Simply put, if the person who gifted you the money passes away within seven years, you may have to pay IHT on the amount given to you.
If they live longer than seven years, there’s no IHT due.
Of course, this is a risk with a gift provided by someone of any age, but it’s naturally a bigger risk among elderly family members.
The person gifting the cash also can’t be seen as “depriving themselves of capital” deliberately, according to the Mortage Advice Bureau.
For example, if it means they’d qualify for certain benefits by giving you the gift, this could cause complications, it added.
Did you have any problems buying the property?
We first enquired about a mortgage, just to give us an idea of what value we were looking at, in October 2016.
This was declined because Johno’s credit score wasn’t great. When he was at university there was a bill in his name and there was a missed payment.
He had to get his credit score up. He got a credit card and paid it off in full every month and made sure he didn’t go into his unarranged overdraft. It improved really quickly, within a few months.
Once we got a deposit together, we were then looking at houses for more than a year. We put lots of offers in but initially we only had one accepted.
We spent money on the survey with the mortgage and then ended up paying for a full survey as well. It turned out the house was about to fall down so we pulled out.
We actually had a break from house hunting after that for a couple of months. Then when we found this house we made sure we had the full survey straight away.
Have you done much work to the property?
Yes, we are still working on it. It has all sorts of strange quirks we didn’t know when we were looking around.
We had two weeks when we got the house when we were still renting so that meant we could get in and clean and paint before moving our stuff in.
Over the last year or so we have spent around £5,700 on a new bathroom, sofa, desk, two beds, three wardrobes, a shed and a barbeque.
How did it feel to get the keys?
It was like a big relief. It was a long time coming after the setbacks with the credit score and then having to pull out of the other house offer.
What is your advice to other first time buyers?
Get a full survey done. If we had bought the other house it would have been a disaster, we would have been paying thousands to fix it.
You also need to take time to research what questions to ask when looking at a house and try to cost up any work that would need doing.
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