Wealth Check: Recession-resistant and set on buying a home
His career prospects are good but he has to start again after spending time abroad. A teacher seeks guidance on saving for a deposit. By Harriet Meyer
Sunday 15 March 2009
Three years ago John-Mark Evans, 37, took some time out of his career to study yoga in India. "Now I'd like to put down some roots," says the chemistry teacher, who arrived back on home soil last month and plans to settle in Brighton. "I'd want to get on to the first rung of the property ladder," he adds. "But I can't see myself attempting to buy in the next year, as I don't reckon the bottom of the market has been reached."
Currently, he pays £550 a month to rent a room in a three-bed flat in central Brighton, and is taking his time exploring the area. "As I only moved to the coast this month, I need to find my feet before buying a home."
He is earning £25,000 as a secondary school supply teacher, but hopes to find permanent employment soon. "I don't know how easy it will be to get a mortgage as a supply teacher," he says. "But my profession is secure at present, so I feel I'm in a pretty good position." To boost his income, he hopes to teach Ashtanga yoga classes.
Fortunately, he has a solid base from which to start building a deposit. John-Mark has £3,200 in a cash individual savings account (ISA) with National Savings & Investments, paying 1.8 per cent, and £3,000 in an ICICI bank HiSave account paying 2.45 per cent. "As I've been out of the country over the past few years, I haven't been contributing to these savings accounts, but I plan to start as soon as possible."
To fund his travels, John-Mark used compensation received after a motorbike accident. "I got nine months' loss of earnings, which was a nice sum," he says. As a result, he managed to avoid falling into debt during his time abroad, paying off the balance each month on his Lloyds TSB credit card, which he used to rack up free air miles.
With regard to retirement, he has made four years' worth of contributions to the Teachers' Pension Scheme, paying in 7 per cent of salary. He has no protection policies in place.
With a career that remains stable during a recession and a base from which to build savings as the housing market plummets, John-Mark is in a better position than many, agree our panel of independent financial advisers (IFAs). "As a chemistry teacher, he will be in demand and should find a full-time post. From there he simply needs to get into the habit of regular saving," says Mark Wapshott at IFA St Edmundsbury Financial Services.
With prices plummeting, John-Mark is wise to let them fall further before buying a home, agree the advisers. But he has chosen an expensive city.
As a guide he will need a deposit of 10 to 15 per cent to gain access to a decent choice of mortgage deals, says Richard Morea from London & Country. However, even if he can only show a year's worth of supply teaching as income, this should be sufficient to appeal to lenders for standard deals, Mr Morea adds, as teaching is considered a secure occupation.
John-Mark's £6,200 in savings, though, is likely to be "swallowed up in fees and stamp duty", says Dennis Hall at Yellowtail Financial Planning. As a solution, he could opt for the Government's HomeBuy initiative, aimed at key workers such as teachers. Under this scheme, he could buy a share in a property – whatever he is able to afford – rather than all of it.
MyChoice HomeBuy is one of the most popular schemes. John-Mark could take out a low-interest equity loan of 15 to 50 per cent of the purchase price through his local housing association, with interest charged at 1.75 per cent. "And he could take a mortgage for the remaining balance with a willing lender," says Mr Morea.
He could increase his share in the property by 10 per cent at a time by gradually buying more chunks.
John-Mark should squirrel away as much cash as possible each month towards the property purchase. Yet with savings-account providers paying a pittance in interest, he will have to be patient to build a sufficient sum, says Gordon Bowden of Quainton Hills Financial Planning.
He could benefit from a more attractive rate on his individual savings account by transferring to Marks & Spencer's cash ISA, paying 3.1 per cent, and fixing this for a year, adds Mr Bowden. And while Nationwide's e-Savings Plus pays 2.5 per cent, Alliance & Leicester pays 3 per cent, including an introductory bonus, for the first year.
John-Mark should check to see if he's eligible for a tax rebate, say the advisers. An individual's annual allowance (currently £6,035) – the amount they earn before paying tax – under PAYE is divided into 12 months to cover the tax year. Depending on when he went travelling, he may find he is able to reclaim some of this sum if it remains unused. He should complete form R40 (available from www.hmrc.gov.uk), with a letter asking if he is eligible for a refund, and send it to his tax office.
To make a property purchase tax-efficient, he could see if his finances will stretch to a flat with a spare bedroom, allowing him the option of renting this out for extra income. The Rent a Room scheme allows him to rent out a room and benefit from up to £4,250 a year in rental income tax free, says Mr Bowden.
John-Mark is fortunate to belong to one of the few remaining final-salary pension schemes. But he only has four years of contributions behind him and there are several ways in which he could top up his pension in future.
The teachers' scheme offers the chance to buy added years through additional voluntary contributions (AVCs), which are guaranteed to provide extra income in retirement. "This can be very valuable and does not involve investment risk," says Mr Bowden.
As he is single with no dependants, John-Mark has no need for life cover. "And," adds Mr Bowden, "he has the luxury of a three-times salary death-in-service benefit as a member of the Teachers' Pension Scheme."
And why are 'southern' ways of speaking spreading north?
Banks are brought to account by switchers as growing number of people expect to be rewarded by their bank
Bargain Hunter: Playmobil plays to the gallery with discounts on its toy range
How to start your own internet business
Five ways to make money on the internet
So what difference will the Autumn Statement make to your finances?
- 1 Cameron's freebie to apartheid South Africa
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 A forgotten episode in Russian history leaves links with the Philippines
- 4 Australian ultra-nationalist politician Stephanie Banister in car crash immigration TV interview
- 5 Nelson Mandela: From 'terrorist' to tea with the Queen
- < Previous
- Next >
iJobs Money & Business
£55000 - £70000 per annum: Pro-Recruitment Group: A well-known and renowned in...
£450 - £500 per hour: Cornwallis Elt : Business Analyst Finance System Hy...
£400 - £550 per day: Cornwallis Elt : BUSINESS ANALYST- OPERATIONS- PRIVATE B...
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
Day In a Page
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden