Question
My son is 18 and is about to receive a £35,000 claim after having an accident as a child. I want to know where it is best to put the money so that it earns interest until I am ready to buy a house and use it as a deposit.
Darren’s answer
I’m sorry to hear about your son’s accident. This sounds like a solid plan to help your son get on the property ladder in the future.
The amount of savings required depends on the type of property, its value and general factors when looking at mortgages such as affordability, income and credit score.
There are savings accounts and programs specifically designed to help first-time buyers build up a deposit, and some offer rewards and incentives that regular savings accounts don’t.
These are not directly linked to the lender but can boost your savings.
The main savings account for a first-time buyer is the Lifetime Savings Account (LISA):
-
- Available if you are 18-39 years old when opened
- You can save up to £4,000 per tax year
- The UK government adds a 25% bonus on your savings (up to £1,000 per year)
- You must use it to buy your first home worth up to £450,000
- Your bonus and savings go directly to your attorney upon purchase
Even if you don’t qualify for a LISA (for example, if you’re over 39), you can still use other savings accounts to build up your deposit. These include:
-
- International monetary accounting standards – The interest is tax-free and you can currently deposit up to £20,000 a year via ISA types
- Regular savings accounts – They often offer higher interest if you save a set amount each month
- Easy-to-access, high-interest accounts – Good for flexible savings that you may need to access quickly
These options do not receive a government bonus, but they still increase the size of your deposits. Although these limitations present, reaching the maximum allowable tax exemption will help improve savings balances.
Some general advice:
-
- Save in different ways – such as a lump sum and combine it with the regular amount Savings account
- Look for the best rates and remember that these rates may not be with your current bank or building society
Once your child is ready to start the home buying journey, talk to a mortgage broker who can help you with some other incentives and plans to help you get on the property ladder, such as low-deposit mortgages from some lenders, shared ownership and shared equity.
