I joined a peer to peer savings scheme to help buy £335k two-bed first home
HARD-WORKING doctor Irene Asamoah, 29, struggled to get into a habit putting money away regularly despite working extra hospital shifts in a bid to boost her savings.
To resist the urge of spending on holidays, Irene joined a peer to peer savings scheme to help her save up a house deposit.
The scheme, which is run by StepLadder, asked her to pay £750 a month for 16 months.
Every month one of 16 savers was then selected to receive the full collective sum of £12,000.
It’s risky though. The schemes aren’t regulated in the way banks are, meaning your cash could be lost if the business fails, but Irene says she wasn’t worried.
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Irene was very lucky. After four months she was drawn to receive the £12,000 payout.
She had to continue paying the £750 a month for the full 16 months.
She used the £12,000 along with other savings to put down roughly 10%, or £35,000, to buy a £335,000 two-bed house in Uxbridge, west London.
Irene shares her experiences of getting on the property ladder for The Sun’s My First Home series.
What’s your new home like?
It’s a two-bedroom terraced house located in Uxbridge, in West London. It has one bathroom and two toilets, as well as a big garden.
When I first moved in, it was very old-fashioned with old carpets and popcorn ceilings.
The latter is a ceiling with a certain spray-on or paint-on treatment, which used to be common to cover up flaws.
The house is modern now because I’ve renovated it and ripped everything out, it cost me £20,000.
The property goes in cream colours with some more earthy tones.
How much did you pay for it?
I paid £335,000 for my home, putting down a rough 10% deposit of £35,000.
The house was actually on the market for £350,000 but I significantly under-offered initially and put down £315,000. The seller and I eventually settled on £335,000.
I put down the offer in June last year, and the transaction completed in January.
I got a mortgage over 35 years, fixed for the first two years. My interest rate is around 2%, and my repayments are now roughly £1,000-1,100 a month.
How did you save up for the deposit?
I joined a rotating savings scheme [also known as peer to peer] run by a startup called StepLadder, which launched at the beginning of last year.
I found about it through an Instagram ad and was intrigued as I’d been thinking about buying a home for a while.
I did research on it and it seemed legitimate, so I spoke to StepLadder over the phone and signed up within a few weeks.
I was in a “circle” of 16 people who each contributed £750 each month to a savings pool over 16 months.
Every month, one member of the pool was selected to receive £12,000.
After four months, having contributed just £3,000, my name was drawn and I received £12,000.
I still had to contribute the £750 monthly payment for the full 16-month period though.
What is peer to peer or a rotating savings scheme?
ROTATING Savings and Credit Associations (RSCA) are peer to peer investment schemes.
If you’re interested in using one you need to be aware of the catches. We explain what to look out for.
Peer to peer firms are not covered by the Financial Services Compensation Scheme, meaning your money isn’t protected like a bank if the company did go bust.
Stepladder is owned by More Lending Solutions, which is regulated by the Financial Conduct Authority.
There are many peer to peer lending platforms in the UK, including Zopa and Funding Circle, although Portia’s Partnership Savings Club and StepLadder are one of few firms offering savings circles.
You usually have to pass a credit and affordability check before you sign up.
StepLadder also charges a monthly fee of around 3-5%, which means you’d pay £25 extra on a £750 payment.
In total you’d pay £400 in fees – and you aren’t getting a return in terms of interest on your investment.
There are also late payment fees which you need to be careful of.
It’s also worth checking whether the firm will cover the cost of an investment if another participant drops out – StepLadder says it will.
Plus you can only access the cash once you find a house to buy and the cash is sent to your solicitor.
Keep in mind the scheme could make it more difficult to get a mortgage until the circle has ended as you may have to still pay a large chunk each month.
Your savings could also earn interest elsewhere at a higher rate – and you wouldn't have to pay a fee.
Peer to peer firm Lendy, which offered loans on property developments, collapsed into administration in May 2019, with investors at risk of losing a collective £152million.
Funding Secure then went bust in October last year, leaving investors in limbo about £80million worth of loans.
I found the savings scheme really helpful, as I knew I wouldn’t have the commitment to put away the £750 each month.
I probably would have spent it on holiday otherwise, so it definitely helped me buy a property sooner.
I wasn’t really in touch with the other people in my circle, but we had a WhatsApp group and whenever someone’s name was drawn, we congratulated each other.
How did you cut back on your spending?
I started looking for homes before I had saved the deposit and used that as the incentive and motivation I needed to help plan how much I needed to save.
I was quite strict with savings in terms of how much I was spending, and saved around £2,000 each month including the £750 for StepLadder.
It’d put away as much as I could each month into a savings account, but it wasn’t a scheduled amount.
I cut back by taking lunch into work and avoided spending on several holidays abroad like I would have in previous years.
I have a slight coffee addiction so I stopped buying two coffees a day at work, and took Nescafe granules with me.
I also cut back on shopping for new clothes, purchasing new items only once or twice per year.
Plus, My Uber account took a back seat and I found ordering tap water at dinner instead of my usual wine was helpful in cutting back costs too.
Basically, I had a slightly less “fun” year in order to achieve my long-term goal of owning my own home.
Luckily, I had the opportunity to work lots which meant it was slightly easier to put money away at the end of each month.
I’d do two or three extra shifts at the hospital each week on top of my full-time job as a doctor.
I was a higher-rate taxpayer, meaning I earned more than £50,000 a year, which was really helpful in terms of getting the money.
I’d been renting before but temporarily also moved home to my parents’ place for a year to help me save.
How did you decide on the area?
It was really tricky, initially I was looking everywhere and in Borehamwood because it’s near my family.
Eventually I ended up in Uxbridge – it's just three minutes away from family.
It was the best deal and for me, as a Christian, it felt like an answered prayer.
I was like “God, please help me out” and then this showed up on Rightmove. It ticked all the boxes.
I was initially looking at flats, but then considering ground rents with leaseholds, I decided to buy a house where it felt like there was a bit more freedom.
I’m planning to stay here for at least five years.
Did you encounter any problems with the purchase?
It was a bit tricky, because my first mortgage was refused from Barclays. They didn’t really give a reason, but potentially because I was going for a lower deposit.
The second mortgage went through though, thankfully.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home's value – or 40% in London – after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.
"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Another issue I had was when the offer had been accepted. I was in a chain and the guy who was moving from this house had found a new place, but then it turns out it had a crack in the wall.
So he had to find another place so rather than being smooth, the chain made it a bit longer.
How did you afford to furnish it?
I had some furniture from before but it was a mixture. The furniture was quite delayed, so I’ve only just finished it actually.
I’d buy the furniture monthly when I moved in. As payday came, I’d just buy a few more bits and pieces.
What advice would you give to other first-time buyers?
Try not to be disheartened if anything goes wrong.
It also helps having a clear cut figure in terms of your budget for the house.
It’s also important to think realistically about long-term costs, so when I was looking at flats, I had to think about service charges and ground rent.
Plus, consider your future career plans so you can calculate the affordability and leeway in terms of being able to pay your mortgage long-term.
A first-time buyer tells us how moving out of London and quitting the gym helped her buy £450,000 first-home.
Meanwhile, another stopped spending £100 a month on clothes and shoes to help him save up for his £315,000 one-bedroom flat.
Plus, a married couple managed to buy their £282,000 two-bedroom terraced house outside Brighton by cutting back on holidays and eating out.
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