With so much talk of “getting on the property ladder” as early as possible, it can be easy to feel left behind. But there's no deadline! It’s never too late to start saving to buy your first home.
Financially speaking, the earlier you buy your first home, the better. It means you have longer to pay off your mortgage before you retire and you’ll likely be putting money towards paying off your mortgage rather than lining your landlord’s pocket.
But buying young isn’t always possible.
In fact, high house prices and the rising cost of living are forcing more people to rent for longer than ever before as fewer young people are able to save for a deposit.
But just because you’re not in your early 20s doesn’t mean you can’t, or shouldn’t, aim to buy your own home.
In fact, depending on your circumstances, buying your first home when you’re 40 might be better for you than buying it earlier in life.
The benefits of buying a house at 40
Here are just a few of the advantages to buying your first home later.
You’ll have more time to build a bigger deposit
This is probably the most obvious! By waiting a few more years, you can spend more time putting money aside for a deposit, which means better mortgage rates and, potentially, more properties to choose from. Plus the more money you put away, the less you’ll need to borrow from a mortgage lender.
You’ll also be giving your money more time to grow, whether you keep it in cash or invest it.
If you’re still in your 30s, a lifetime ISA could help you maximise your savings as the government tops up everything you pay in by a whopping 25%.
So, the more you save, the more money you’ll get from the government to help you buy your first home.
Just think - if you spend the next 10 years maxing out your lifetime ISA annual allowance at £4,000 each tax year, you’ll build up a £40,000 deposit. On top of that, you’ll get £1,000 of government bonus each tax year, meaning an extra £10,000 in 10 years. That’s a £50,000 down payment!
You’ll likely be more financially stable
It's likely you'll be more financial stable in your 40s than in their 20s or 30s. You’ll probably have less debt, more disposable income and a better credit history.
This means you can not only save up more for your deposit, but you’ll also be able to afford higher monthly payments when you do buy a house which could mean you're able to borrow more from your mortgage provider.
Having less debt and a higher income will also make you look good to mortgage providers, boosting your chances of getting the mortgage you want.
You’ll know what home you want
When you’re rushing to get on the property ladder in your 20s or 30s, you may end up choosing a home that suits your lifestyle now but won’t be the best for you later on. For example, if you decide to have children or move to a job based elsewhere.
Waiting a few more years means you're more likely to know what you want in the long term. An extra bedroom or a quiet neighbourhood might become critical!
You’re more likely to have someone you’re happy to buy with
Of course, this isn’t the case for everyone, but if you’re buying your first home in your 40s, you may be in a long-term relationship with someone you’re comfortable making a big financial commitment with.
Not only will you be able to pool your savings for a bigger mortgage deposit, you’ll also have someone to share mortgage payments with. Having a second salary to add to your household will increase how much you can borrow.
It’s important to remember that if you own a home with someone else and the relationship breaks down, they could force you to sell your home to get their money back. A solicitor can help draw up a legal agreement to protect you both.
How a lifetime ISA could help you buy your first home (but you might need to be quick!)
Lifetime ISAs come with a 25% government bonus. Every time you pay in, the government pays in.
As you can pay in up to £4,000 each tax year, you can get up to £1,000 a year in government bonus.
You have to open your account before you turn 40, but you can keep paying in until you turn 50. That bonus can really add up!
A word of caution: lifetime ISAs are designed to put money away to buy your first home or for life after 60. If you withdraw money for anything other than buying your first home (and are younger than 60), you'll be charged a government withdrawal charge of 25% of everything you withdraw.
Can I use a lifetime ISA if I'm buying with someone else?
Yes. Even if they're not a first-time buyer, you can still use a lifetime ISA if you are.
Even better, if you're both first-time buyers, you can both use a lifetime ISA to buy the same property. You'll each get that £4,000 per tax year paying-in limit, so you have double the bonus available between you.
What if my dream home costs more than the lifetime ISA price limit (£450,000)?
If you know that you’ll be spending more than £450,000 on your first home, don’t use a lifetime ISA to save for it.
When you come to buy, you’ll be charged the government withdrawal charge, which will eat into the money you've worked hard to put aside.
If you're already using a lifetime ISA, you could consider buying a smaller place or somewhere that needs work, and moving up the property ladder at a later date.
Open a OneFamily Lifetime ISA
Our Lifetime ISA comes with a 25% government bonus, worth up to £1,000 a year!
Our Lifetime ISA invests in stocks and shares, so the value is likely to go up and down over time. This is normal for this type on investment, but it means there is a risk you could get back less than you put in if you withdraw at a time when the value is lower.
