Saving for a house without using mortgage

[iniquity]

After years of having no money at all we are finally in a position to save around £1500 a month. We would like to save for 9 years and then buy a small property without a mortgage. Does anyone know the best place to put this money? I've looked at house buying and lifetime Isa and you can only use them if you will need a mortgage. We don't want a mortgage for religious reasons.

Thanks

We are using investment ISAs and investment accounts eg with Nutmeg to invest in shares

Or you can get an "Islamic mortgage" which doesn't officially charge interest (open to all, not just Muslims) if that helps? Although they do obviously charge you extra, but it's not called "interest", I think they call it rent!

You can get Islamic mortgages, where you pay ‘rent’ rather than ‘interest’.

Thanks hopelessly we did look at the Islamic mortgage but it seems quite expensive really , we would rather just save and buy within our means. I will look at nutmeg.

I'd look at cash ISAs. Or stocks and shares if you are prepared for the amount to go down as well as up.
One each, and split the money. There is a maximum of 80k in any one account that will be protected in the case of bankruptcy, so keep under that amount- I realise it is a few years of saving off!

What will you do in a decade if house prices have risen more than the amount you can save, plus interest, has increased?

Please excuse my ignorance- I don’t know much about islamic mortgages but does it really work out more expensive than paying rent to live somewhere else for 9 years while you save to buy outright?

I'd suggest you both use a Cash ISA (tax-free) and then put some into a savings account until you reach your tax-free personal allowance (I think £1k interest per year?)

When I was saving, we put money into premium bonds. Although it doesn't pay interest, we won the monthly draw about 5 times in 18 months so worked out at a much higher % than we would have got in savings and it's absolutely no risk.

Thanks for the replies, we are renting cheaply from a close relative. This situation is unlikely to change and the nearest secondary school to the house is outstanding so we don't want to move for 9 years anyway. I don't think house prices will rise too much due to brexit. I'm not sure what would happen if inflation occurred, presumably if that happened everyone would be in trouble, but we would loose the savings so having a mortgage would be better in that scenario. If interest rates rise then savings are better than a mortgage.

Inflation is well over 3% and interest rates are 2% if you struggle. So your savings are vanishing.

The thing is special it only matters if house prices rise above inflation. We could save around 170,000 in 10 years plus we have some shares. If we took a mortgage for 30 years we would end up paying double that on interest rates of 4.4 percent

I'd go for shares. As others have said, interest rates are poor so cash ISAs are not going to pay.

You can lose money but it is unlikely over 9 years. That would be a historic poor performance for it to happen.

Nutmeg is easy to use but the fees are high. I use Halifax that is £12.50 a year but would require a bit more research on what to buy.

It is not very difficult to just put money in low cost tracker funds which is all nutmeg really does.

This is ridiculous. And financially illiterate.
Sorry for being harsh, but your proposals are half-baked. If you really think you can save for nine whole years with nothing getting in the way, children or redundancy for example, then even in this amazing scenario your plans are still daft.

Move to Trefor in Wales, it's nice if isolated, buy a house outright for 30K and work from there. This is more realistic than what you're proposing.

Again, sorry for the harsh tone but you need to get real.

If a mortgage can be avoided then great, what is it, you end up paying about 3 times over for one house!
I wouldn't bank on Brexit lowering house prices, there's still a shortage of housing.

Sorry, but the idea of paying a "rent" instead of interest sounds a bit farcical.

Disquieted, I don't think it's ridiculous. The mortgage repayments if we took one without a large deposit would only be about £300 less than what we could save. I'm a nurse so won't ever be made redundant but if my dh was, I'd rather have savings than a massive mortgage . The problem is predicting what house prices will do. If the economy stalls I cannot see them increasing that much in 9 years.

I’d seek proper financial advice to maximise your return.

Vitaology, I agree paying a rent is just interest in disguise. It is very hard to avoid either paying interest or receiving interest. Al rayan bank seems good, has anyone used them?

If house prices rise above inflation? ????

Where have you been?

even in this amazing scenario your plans are still daft. Daft is paying 3 times over for one house. Unfortunately can't be avoided in a lot of cases due to this awful set up of the mortgage system.

I'd never heard of these rent instead of interest loans before this thread. So interest on savings isn't allowed too then. The banks that offer these types of accounts, do they keep account holders money and not use it to invest then?

*I bet they do invest and have another word instead of rent. Handling fee or something like it.

Sharia savings accounts allow the bank to invest the money and generate a profit. This profit is split in an agreed ratio, so customers receive profit not interest. The expected profit is a prediction rather than guaranteed like a fixed interest rate.

Help to Buy ISA would be a good idea if you could get a Sharia-compliant one. You get a substantial bonus from the government. Definitely check it out.

Whether this plan makes any sense at all depends whether you’re able to live rent free, eg with relatives for the next decade.

Redundancy is not usually a problem for a nurse but a nurse could lose work through sickness, injury, capability issues. Moreover, there are issues of burn out and stress in nursing.

I know a nurse who tried to do what you did, saving for a house who he doesn't need a mortgage - he lost his nursing post, still renting at 60 and no where near the savings he was planning for.

Why not save for a deposit, buy a house and overpay your mortgage.

Specia I have little knowledge of economics that is why I've asked on here . I get interest on my bank account but my husband has declined interest. I'd rather take the interest myself than the bank take it for themselves anyway.

I don't think Brexit will cause a house price crash, like the previous poster have said, there is still housing shortage in this country.

I think UK will heard towards intergenerational mortgages (like in Japan), i.e. passing down debt through the younger generation.