As a First Time Buyer, the prospect of buying your first home can often be overwhelming. There are a ridiculous amount of new words, new concepts and a lot of finances to try and get your head around.
It’s no secret that the Government have been racking their brains to think up as many ideas as possible to help get First Time Buyers on the housing ladder. There are a number of schemes already in place, and even more being reviewed and introduced. The newest offer on the table is called the Lifetime ISA. Two years ago, the Help To Buy ISA was introduced, so you may be left questioning what the difference is, to help make things a little clearer, we’ve sorted through some of the pros and cons for you.
The Lifetime ISA will be available from 6th April 2017, but is it right for you?
The biggest decision maker has to be the savings… with the Lifetime ISA you can save up to £4000 a year, with no monthly caps, meaning you could transfer it in one lump sum. However much you save each year, the Government will boost it by 25%. This means if you make the most of it, you could get an extra £1000 each year towards the deposit of a house. The Help to Buy ISA is a little more restricted, in the first month you can load a maximum of £1200, with a cap of £200 per month thereafter. The Government will then add 25% of whatever is in your ISA account when you come to buy your home. There is less on offer here as your maximum bonus in year 1 is £850 (25% of £3400 max saving), and every other year just £600. This is obviously dependant on the amount you are able to save, but if you can contribute more than £200 a month, the Lifetime ISA will give you more money.
Now that you know what you could save, it’s important to know how you can spend it. The Help to Buy ISA is more flexible for short term saving, in that you only need £1600 to be able to use it and get the 25% boost, which is achievable in three months. However, it can only be used on a house up to £250,000. The Lifetime ISA must be used for a full year to get the bonus, but when you choose to use it, you could buy any home up to £450,000.
With regards to when the money is spent, you are able to withdraw from both ISA’s, meaning if you change your mind about buying, or you need the money for something else, you are able to withdraw, but the amount you withdraw will lose the 25% bonus. If you withdraw the entire amount and close the ISA, there will be no bonus. On the Help to Buy ISA, the bonus gets paid on the payment of a deposit, which is when the ISA is to be used. On the Lifetime ISA, the bonus is paid on every new tax year, but would not be retrievable if it is not used towards a home or pension, the maximum bonus being £32,000 (30 years of saving).
The next question is eligibility. If you’ve bought a property before the answer is no. However if you are buying with someone who is already, or has been, a homeowner, as long as you haven’t bought a property before, you are still eligible. Also, if you are buying with someone who is also a First Time Buyer, you are both able to open an ISA, be it Lifetime or Help to Buy, this means that dependant on your financial situation, you could be £2000 better off per year of saving.
The Help to Buy is pretty flexible when it comes to age, in that anyone over 16 could open one. However, the Lifetime ISA is slightly more restrictive with those aged 18-40 being eligible.
If you already have a Help to Buy ISA, but like the sound of the Lifetime ISA, you can open both, as long as the Help to Buy is transferred within the first year of the Lifetime ISA being open, worth keeping the £4k limit in mind.
Hopefully that helps to demonstrate which ISA might work best in your situation, we would however encourage you read the terms and conditions of any products you look to open and direct any questions to a bank or financial advisor. We’re just here to try and simplify the advice already being given.
At the time of writing, no financial institutes have as yet launched the Lifetime ISA, so keep an eye for providers as of April 6th, and if in doubt, consider a Help to Buy in advance and transfer the savings in due course.
We have a variety of homes available that would be suitable for First Time Buyers, including some with Help to Buy (a whole other kettle of fish), for more information, please visit www.mackenziesmith.co.uk or contact your local branch.
Ash Vale – firstname.lastname@example.org – 01252 353030
Farnborough – email@example.com – 01252 375999
Fleet – firstname.lastname@example.org – 01252 812121
Hook – email@example.com – 01256 764666
Hartley Wintney – firstname.lastname@example.org – 01252 844015
Lettings – email@example.com – 01252 514000