I am a first-time buyer, saving up to buy a flat in London. I earn £62,000 a year and am saving £2,000 a month towards my deposit. At present, I split that money between a Help to Buy Isa and a savings account. My goal is to have saved a deposit within the next five to 10 years. What is the best way to reach my goal?
The best way to reach your goal is to have a good understanding of what you are trying to achieve. If you haven’t already, I suggest you do some thorough research into the type of property you’re looking to buy, where it is located and how much it is likely to cost.Then you can determine the size of deposit you’ll need.
Next, work out how much you can save each month. You should then have an idea of how long it will take you to amass the deposit for your first home.
In terms of savings, you should aim to save the maximum £200 a month in the Help to Buy Isa. This is because the government will add a bonus of 25% to savings in your Help to Buy Isa when you buy your first property, subject to a cap of £3,000. In the London area, the Help to Buy Isa can be used to purchase a property valued up to £450,000.
As for your additional savings, if you’re likely to reach your deposit target within five years, then you should probably stick to competitive savings accounts. From April, you can, as a higher-rate taxpayer, benefit from £500 tax-free savings interest each year through the new Personal Savings Allowance.
If you’re likely to be saving for more than five years, then consider investments rather than savings. A good choice would be a tracker fund or a global equity fund, held within a stocks and shares Isa.