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Buying a house at 40: why 30 isn’t too late to start saving

With so much talk of “getting on the property ladder” as early as possible, it can be easy to become demotivated if you haven’t managed to do it yet. But 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 some of the advantages of waiting a little longer to buy your first home.

You’ll have more time to build a bigger deposit

This is probably the most obvious advantage of buying your first home at 40! 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 have 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 in a stocks and shares account. Money held in a cash account grows by building up interest, but if you’re saving for a long time it might lose its spending power as inflation could rise above interest rates.

Money held in a stocks and shares account grows by being invested in the stock market. While there is potential for you to get back less than you’ve put in due to changes in the stock market, money that’s invested tends to perform better over the long-term than money held in cash. In fact, in every 10-year period since 2000, stocks and shares have out-grown interest rates.*

If you’re still in your 30s, a lifetime ISA could help you become a homeowner quicker than you’d think. Available to anyone in the UK age 39 or younger, you get a 25% government bonus on everything you put into a lifetime ISA. This means the longer you save for, the more free money you’ll get to help you buy your first home.

For example, if you spend ten 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 from your government bonus each tax year, meaning an extra £10,000 in ten years. That’s a £50,000 down payment!

You’ll likely be more financially stable

Most people are more likely to have better financial stability in their 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 so are likely to be able to borrow more or pay your mortgage off quicker.

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 trying to rush to get on the property ladder, you could end up settling for a home that isn’t necessarily what you want or where you want to live.

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 somewhere else.

Having waited a few more years, you’re more likely to know what you want in the long term and what your needs are. Certain things like an extra bedroom or a quiet neighbourhood might not have meant much to you when you were younger, but you may value these things now you have a bit of life experience behind you!

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 together so you can put down a bigger mortgage deposit, you’ll also have someone to share the cost of mortgage payments with.

On top of that, 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. It’s worth having a conversation before committing so you have a plan for what will happen you do break up, even if that feels unlikely at the moment. A solicitor can help draw up a legal agreement to protect you both, which could be a good idea if you’re not paying the same deposit or if one of you doesn’t pay their share of the mortgage payments.

How a lifetime ISA could help you buy your first home (but you might need to be quick!)

If you open a lifetime ISA at 30 and pay in the maximum £4,000 each tax year for 10 years, you’ll pay in £40,000 and gain an extra £10,000 of government bonus!

This is without accounting for potential growth from building interest (if held in cash) or being invested (if held in a stocks and shares account). Just keep in mind that house prices could go up faster than interest rates or investment returns.

But you only have until you turn 40 to open a lifetime ISA, so it could be worth opening one now so that you can start using it when you’re ready to start saving. You also can’t keep paying into it after you turn 50, so the sooner you start using it, the more government bonus you could potentially get!

It’s worth bearing in mind that you have to be sure you want to use your lifetime ISA money towards buying your first home. If you withdraw from your lifetime ISA for any other reason before you turn 60, you’ll be charged a 25% penalty fee on everything you withdraw, so you’ll lose both your government bonus and some of the money you put in.

What if I’m buying a home with someone else?

When buying a home with someone else, you can both use your lifetime ISAs towards the same property, as long as neither of you have ever bought a home before.

If two people max-out their lifetime ISA allowances for 10 years, that could mean a deposit of £100,000, plus interest or investment returns. If you’re choosing a property valued at the top-end of the lifetime ISA limit, which is £450,000, that’s a 22% deposit, meaning you’d only have to borrow 78% of the value of the house.

What if my dream home costs more than the lifetime ISA price limit?

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 a government withdrawal charge which will be higher than the bonus they gave you.

If you’re already using a lifetime ISA and realise that the type of homes you want cost more than £450,000, you could consider buying a home that needs renovation work and therefore costs less.

Or you could perhaps buy a more affordable home for now with the intention of buying your dream home later.

Even if you think the kind of home you want will cost more than £450,000, you should consider that just because you’re buying your first home at 40 doesn’t mean you can’t upgrade later.

It’s much easier to aim to buy your dream home once you’re already on the property ladder. By choosing a first home that’s under the £450,000 lifetime ISA price limit, you’re taking full advantage of your government bonus by converting that free money into something that you own and can sell later.

Ready to start saving for your first home?

Our Lifetime ISA could help! You'll gain a 25% boost from the government on top of your savings, as well as any potential stocks and shares returns.

Our Lifetime ISA

Our Lifetime ISA invests in stocks and shares. This means it has good long-term growth potential, but the value of your investments could go down as well as up so you could end up with less money than you've put in.

If you withdraw money from your Lifetime ISA before you turn 60 for any purpose other than buying a home, you'll pay a 25% penalty fee that adds up to more than the government bonus, so you'll lose some of the money you put in.

* Source: Barclays GILT study 2023.