Wealth Check: 'I'm trying to build up a deposit'

Penny Jackson is 26 and works as a humanities teacher in London. Currently renting, Penny hopes to get on the property ladder within the next five or six years. She is trying to save £150 a month to build a deposit. Her monthly outgoings make this difficult.

As well as help with her general budgeting, Penny would also like advice about saving for retirement. She has been paying £115 a month into the Teachers' Superannuation scheme.

We asked three independent financial advisers for their help: Anna Bowes of Chase de Vere, James Cotton of London & Country and Colin Jackson of Baronworth Investment Services.

Case notes

Penny Jackson, 26, London

Personal: Works as a teacher in London. After tax, her monthly salary is £1,310.

Property: Penny currently rents, but would like to buy her own home within the next five or six years.

Savings: She is currently aiming to put around £150 by each month, but has budgeting constraints.

Pension: Contributing monthly to the Teachers' Superannuation scheme.

Monthly expenditure: Living expenses £600; regular savings £150; pension £115; student loan £60; general expenses £250.

SAVINGS

Penny should seek the best interest rates available, so she must also take advantage of her mini cash individual savings account (ISA) allowance. She can transfer up to £3,000 from her current savings into a competitive account such as Alliance & Leicester's Direct ISA. This pays 5.25 per cent, although this includes a bonus only payable for the first 12 months. And after 5 April, when the new tax year begins, she can open another cash ISA.

The more pennies Penny can save, the better. A bigger deposit means a better choice of mortgage deals and lower rates, said Cotton. She should aim to save 10 per cent of the house price.

MORTGAGE

The amount she will be able to borrow will depend on how much she earns at the time. Penny could borrow up to four times her salary, so she could get a mortgage for around £92,000. Some lenders use affordability calculators which may offer more . Borrowing £100,000 at a rate of 5 per cent would cost around £585 a month, over 25 years.

Jackson is not optimistic. On her current income and expenditure, Penny will probably find it difficult to purchase a property in London within the next few years, he warns. It is unlikely that she will be able to save up enough for a deposit, legal fees and stamp duty. Her best option would be to buy with one or two other people, he suggests. If Penny goes down this route she must seek legal advice and make sure that a contract is drawn up.

When it comes to choosing the type of mortgage, there are two main options - fixed or variable. A variable rate will fluctuate as interest rates move up and down. A fixed rate usually costs more, but it means the rate and therefore the monthly payments remain fixed. A fixed rate provides security and is particularly suitable for those on a budget, so this may be the best option for Penny as a first-time buyer, Cotton said.

Aside from a deposit, there are other costs that Penny must save for. If she buys a property for more than £120,000, there will be stamp duty to pay, which is currently 1 per cent of the purchase price, assuming the property is worth less than £250,000 (this is based on current rules and could change in the future).

She will also have to pay for a valuation and cover the cost of legal fees. Penny may also come across higher lending charges (HLCs) which some lenders levy if the borrower's deposit is 10 per cent or less. These can cost thousands of pounds and should be avoided if at all possible. Fortunately, a number of lenders such as Nationwide, Cheltenham & Gloucester and Co-Op offer deals with no HLCs.

The fact that she is a teacher may provide Penny with a wider range of mortgage options. Scottish Widows, for example, will lend more to people in certain professions. The Teachers Building Society also has special deals.

She may also qualify for help under the Government's Key Worker scheme - her school should be able to give her more details, or she can go to www.keyworkerliving.co.uk.

PENSION

Bowes says that for the time being Penny can concentrate on saving her house deposit in the knowledge that she is already contributing into a pension - the Teachers' Superannuation scheme - that offers good value.

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
Written protest: Julia Donaldson, author of The Gruffalo, has sent an open letter to the Culture Secretary
books
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
Sport
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
News
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Sport
footballDoes Hodgson's England team have an identity yet?
Travel
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
News
news
News
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
media
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss