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How to buy a house in your early 20s

·6-min read
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There are various options for young people wanting to get on the housing ladder. Photo: Getty

Buying a house in your early 20s might seem like an impossible dream but it can be done. We look at the schemes designed to help you out and talk to those who managed it before they were 25.

The average age of a first-time buyer in the UK is now 34. This isn’t really surprising when you think that, according to Halifax, the average property costs £261,743, an increase of 9.5%, or just over £22,000, on last year. With the goalposts constantly being moved further away, it can feel like you’re going to have to wait forever to get your own set of keys, but it is still possible in your early 20s. You just need to be committed to dedicated saving, careful money management and make good use of the various schemes on offer.

The deposit

The first stumbling block for many people wanting to buy their own home is saving enough money for a deposit. In most cases, you need a minimum of 5% of the property’s value.

As well as cutting little luxuries, being financially savvy when it comes to bills and sacrificing the odd trip away, first-time buyers can top-up their savings with a new scheme set up by the government. With a Lifetime ISA (a tweaked version of the former Help-to-Buy ISA), the government adds a 25% bonus to your savings, up to a maximum of £1,000 per year. You can save up to £4,000 annually but you must use the money to buy your first home or forfeit the 25% bonus.

Alexandra Bullen, 24, bought a house in Northamptonshire this year. “We used a Help-to-Buy ISA to help with our savings, and tried to save as much money as we possibly could. I think the lockdown helped boost our funds as we didn’t have commuting costs and couldn’t go on holiday, but saving for our house was our main priority in terms of finances.”

Watch: How much money do I need to buy a house?

It can be helpful to talk to a mortgage adviser about how much deposit you will need, even before you’re ready to buy. Georgia Farquharson was 23 when she bought her flat in Aylesbury. “I wasn't necessarily ready to buy a house, but I went to visit a mortgage adviser to get an idea of how far away I was from being able to. I'd set up a Help-to-Buy ISA and thought it would be good to have an idea of how much I needed to save and whether that goal was one year, two years or five years away… I was a lot closer than I thought,” she said.

As well as help with a deposit, there are a number of government-backed schemes available for first-time buyers.

Help-to-Buy: Equity loan

This scheme sees first-time buyers purchase 80% of the equity of a new build property with the government having an equity share of the remaining 20%. In London, this is tweaked to a 60/40 split and capped at a property price of £600,000 (this cap varies regionally). Homebuyers must contribute a minimum 5% deposit and up to 75% mortgage and repay the remaining equity when they sell their home or within 25 years. The equity loan is interest-free for the first five years so, if you can manage it, it’s well worth paying it off by then.

Georgia Farquharson took advantage of the scheme – even though she didn’t have to. “It's essentially a free loan for five years, so as long as you're in a position to get out of it after five years, I think it's really beneficial in helping you get on the property ladder. I could have not used it and only got a one-bedroom property, but my dad always told me to push yourself when it comes to the mortgage, so I did, got a two-bedroom property and Airbnb'd the spare room for two years.”

Alexandra Bullen also used the scheme so she borrowed less on her mortgage: “It does mean we have an equity loan to pay back on top of our mortgage, but this is no different from the financial situation we were in when saving for our deposit.” 

A word of warning though: if you ignore the equity loan for the interest-free period, you’ll either have to remortgage at the end of the five years or see your monthly payments increase significantly, so have a plan in place.

Watch: What do stamp duty cuts mean for buyers and house prices?

Shared ownership

Many first-time buyers (especially those in their 20s) can’t afford the mortgage on 80% of a home, or maybe they want to buy somewhere that isn’t a new build. For them, shared ownership offers the chance to buy a share in a home of between 10% and 75% of its value. You’ll own this amount and then pay rent on the rest. The deposit required is less than for other schemes – 5% of the share you are buying (rather than the property’s market value) – plus you can get on the property ladder with a significantly smaller mortgage. Household income must be under £80,000 (£90,000 in London) and, when you can afford to, there’s the option of “staircasing”, increasing the percentage you own and reducing the percentage you rent.

Tyra Mitchell was 20 when she bought a house with her husband via shared ownership. “We went in at 40% ownership, 60% rent in January 2017 and just now, in March 2021, we staircased to 80/20. Owning a property means we aren’t chucking money away renting; we are secure and we have an idea of what savings we can afford for other things.”

Mortgage guarantee scheme

This government-backed mortgage scheme is for first-time and existing buyers who want to purchase properties up to a value of £600,000 but only have a 5% deposit. On the face of it, there are few differences from getting a mortgage under normal circumstances, but the government will compensate lenders for the majority of any potential loss they might make, the idea being to encourage them to loan to those they might usually reject.

Stamp duty relief for first-time buyers

There are several costs associated with buying a property that you need to budget for, including your solicitor and removal costs. The biggest, however, is probably stamp duty land tax. This is the tax you pay when you buy a home and, from October 2021 it comes into effect on purchases over £125,000. First-time buyers, however, are given a discount and don’t pay any tax on properties below £300,000 and a discounted rate of 5% on the portion between £300,000 and £500,000. You can use a stamp duty calculator to work out how much tax you will need to pay.

While buying a property in your early 20s can take time, money and huge amounts of effort, Georgia Farquharson has no regrets: “It's also something I'm incredibly proud of and is a solace I love having to call my own.”

Data chart shows significantly higher proportion of owner-occupiers in 25-34 age group in 2018-19. Source: English Housing Survey 2018 to 2019
Data chart shows significantly higher proportion of owner-occupiers in 25-34 age group in 2018-19. Source: English Housing Survey 2018 to 2019
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