Richard Thompson, 33, and his fiancée Lindsay Stephenson, 36, bought their new-build home earlier this year with a £55,750 deposit – and are now getting married in a matter of days' time.
But just eight years ago their story could have ended up very differently.
In December 2010, Richard was offered redundancy from his job in a bank and seized the opportunity to visit family in Cleveland, Australia, funding the trip with some of his £10,000 payout.
He borrowed $5,000 (£2,700) from his uncle to buy a car to use while he was out there as well as paying them $100 (£55) a week in rent.
It wasn't long before he began relying on his credit card to fill the 3.0L Mitsubishi Pajer with fuel.
To make matters worse, the car developed serious engine problems, which cost $3,500 (£1,940) to repair. Unfortunately, these were only partly successful meaning he ended up selling the car for just $1,100 (£600).
Four months later, he returned to the UK with no savings and £5,000 worth of credit card debts.
Keen to turn his savings around, he got a job processing PPI claims, and set about cutting out all luxuries, including eating out and socialising.
Within 18 months he’d cleared his £5,000 credit card debt and saved enough to buy a car.
He also received an unexpected £4,000 bonus when his previous employer closed his pension, which was used to repay the car loan from his uncle in Australia.
Richard soon changed jobs, working as a customer adviser at an insurance company, and he’s now turned his life around.
Out of debt and in a much better financial position, Richard set his sights on buying his own home, eventually realising his dream earlier this year when he and Lindsay, a deputy manager at a private nursery, bought their first home.
Richard has even signed up to a workplace pension, which he began ploughing money into, and as a result now has more than £30,000 in his pension pot.
This week in My First Home, we spoke to Richard and Lindsay to find out how turning around their finances helped them get on the property ladder.
What’s your new house like?
We were looking for somewhere I could commute to work in Manchester, but which was also big enough for me to have a home office, and included a guest bedroom and a spare as we’d like to have children.
I soon realised that somewhere close to Sale in Manchester, where I’m from, would be too expensive. We soon settled on Blackpool as this is where Lindsay is from.
I was particularly keen on a new build as I liked the idea of somewhere that didn’t come with a whole host of hidden problems and redecoration issues. The thought of a blank canvas was much more appealing.
What help is out there for first-time buyers?
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.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home's value – or 40 per cent in London – after you've put down a five per cent 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 per cent 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 per cent 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 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
How much did your new home cost and were there any other fees involved?
Our house cost £223,000, and we put down a 25 per cent deposit, of £55,750.
This meant we borrowed £167,250. We secured a five-year fixed rate mortgage over a 33-year term at 2.05 per cent through Barclays. Our monthly repayments are £580 and the monthly council tax is £146.
The product arrangement fee was £999, which included the property valuation. We didn’t pay legal fees as my mum is a legal secretary and she managed to have them waived for us.
Although it’s a freehold – meaning we own the building as well as the land it sits on – we pay a management fee of £360 a year to keep the estate looking spick and span.
They have rules too, such as you can’t put a satellite disc on the front of the property, only on the side, which is a good thing.
How did you save for your new home?
It took us about six and a half years to save enough for the deposit. We both lived at home with our parents while we saved.
I paid £150 a month board and Lindsey paid her way by shopping for the house here and there.
We saved what we could every month and in the last year and a half, we managed to up that to £15,000 between us every month.
We considered the Help to Buy loan scheme as we’d be first-time buyers, but I was turned off the scheme when I looked into it in more detail.
I didn’t like the fact that rather than repay the amount the Government lent to make the purchase, we’d pay back the market value of their share, which I thought would only be higher.
We had a Help to Buy Isa of about £12,000 between us and we got about £3,000 on top in a bonus payment as you get a 25 per cent bonus on what you have saved when
used for a house purchase.
Once we had enough, we also put £50,000 in premium bonds because the winnings were worth more than what we would earn in interest as rates are so low. Over 12 months we won abut £600.
We used the winnings made from premiums bonds and any spare cash we got went into saving for the house.
How did you manage to save so much for your pension at the same time?
I knew saving for a home was important but I am also aware that I need to save as much as possible for retirement too.
For both my previous and current employer, I paid in the minimum amount so the company matched my contributions. I then paid in more when I could to boost it.
There were even several months when I contributed 100 per cent of my salary that month. Now, I contribute 25 per cent of my salary every month.
Were there any expensive post-purchase costs?
We had saved up £10,000 to help with buying essentials and furnishings, sofas, beds and the like.
How to pay off large amounts of debt
- Personal loans: a type of unsecured loan where you borrow money from a lender, and agree to pay it back over a set period of time in fixed monthly repayments.
- Balance transfer: part of or all of the debt is transferred from one credit card to another. This usually reduces the amount you pay on interest, but you need to know how to use them properly.
- Talk to your creditors: you’ll have to explain why you’re in debt, what steps you’re taking to get yourself out of the situation and how much you can afford to pay back. They should try and help you, but if they don’t agree a repayment plan, you could contact a charity like StepChange or Citizens Advice.
- Free debt advice: there are loads of groups who can help with your problem debts. Citizen Advice – 0808 800 9060. StepChange – 0800 138 1111. National Debtline – 0808 808 4000.
- Individual voluntary agreement (IVA) and bankruptcy: if you’re unable to pay back debts, you can apply for either of two. They damage your credit score, though, and should therefore only be treated as a last resort.
As you can imagine that money went pretty quickly, but with the essentials in place we now add the finishing touches as and when we feel like it.
For a long time I avoided credit cards, but I came to the conclusion that I could make them work for me.
So we’ve also used these to buy for the house. For example, I got 15 per cent off a new dishwasher by buying it through Topcashback.co.uk. The site gave me 3 per cent back, and as I used a Halifax card, I got an extra 13 per cent back.
How did you feel when you got the keys to the place?
We started looking in January, soon after I proposed to Lindsay. We viewed dozens of places, lining them up every weekend until we found his place after a couple of months.
We were relieved and ecstatic when we completed in mid-July. It’s quite something to be able to call yourself a homeowner.
We’ve had no real issues with the house, as we’d expect given it’s a new build.
Plus, the house is covered by a two year builder’s warranty that we’ve only drawn on for a few blemishes, such as scratches to the laminate flooring, and all these were fixed without any hassle at all.
What’s next for you both?
Well, we certainly have no plans to move at all, we want to settle into our home, enjoy life here and hopefully start a family.
Do you have any advice for first-time buyers?
My advice would be to always save money and always pay into a pension so when these life changes occur, you don’t feel a difference in what you have left to spend
on yourself each month.
Of course, splash out when you can, as we all work to live – don’t live to work.
Also, premium bonds are worth considering, but only if you have enough money saved in them. They only worked well for us as we had so much in them.
What is pension auto-enrolment and how does it work?
- What is pension auto-enrolment? Since October 2012, employers have had to enrol their staff into workplace pensionschemes as part of a government initiative to get people to save more for retirement.
- When does auto-enrolment apply? You will be automatically enrolled into your work's pension scheme if you meet the following criteria:
– You aren't already in a qualifying workplace scheme.
– You are aged at least 22.
– You are below state pension age.
– You earn more than £10,000 a year in 2018/19.
-You work in the UK.
- How much do I contribute? There are minimum contributions that you and your employer must pay.
Minimum contributions are being gradually increased over time.Your minimum contribution applies to anything you earn over £6,032 up to a limit of £46,350 (in the tax year 2018/19). This includes overtime and bonus payments.
- What if I have more than one job?For people with more than one job, each job is treated separately for automatic enrolment purposes. You can still opt out of individual schemes if you want.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
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