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First Time Buyers

Information covering the options available to First Time Buyers

Are you looking for a first time buyer mortgage and need help understanding your options and how the process works? We have plenty of information available right here for free.

The mortgage market can be complex, but with the right helping hand you can have the guidance you need to pick the right loan for your circumstances. As Whole of Market mortgage brokers, our advice can be trusted and tailored to your unique needs.

Posted On: March 13, 2024
Updated On: April 3, 2024

Is the Lifetime ISA better than the Help to Buy ISA?

If you’re looking to take the plunge and own your first property, we’re exploring everything you need to know about the Help to Buy ISA’s replacement: the Lifetime ISA. This guide includes how much it could help you save on your first property, how you can secure your tax-free bonus, and how it compares to the Help to Buy ISA. Is it better? Find out more in this guide.

What is the Lifetime ISA?

Lifetime ISAs are a Government scheme that provides a financial bonus on savings. They are for anyone over the age of 18 and under 40. Unlike the Help to Buy ISA, you can use the extra interest to buy your first home or save for later life.

If using the savings and bonus to pay for a new home, the property will need to cost £450,000 or less. You also need to buy the property at least 12 months after you make your first payment into the ISA.

What was the Help to Buy ISA?

Help to Buy ISAs were a savings-based scheme that enabled first-time property buyers across the UK to claim a Government bonus of up to £3,000. This was essentially the chance to secure a free discount on the value of your first property, which caused quite a buzz a few years ago.

Unfortunately, if you are not already the happy owner of a Help to Buy ISA account, you’ve missed the boat as the scheme closed to new account holders in 2013.

However, buyers with existing accounts can save until 2030. You can pay into the ISA until November 2029 and you can claim the 25% bonus until November 2030.

The bonus is available for home purchases up to £250,000 outside London and up to £450,000 in London.

How much money could you receive?

Lifetime ISA:

The Government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

Help to Buy ISA:

You could save up to £3,000 with a Help to Buy ISA. To receive this full amount, you need to save £12,000.

This is applied on an individual basis, meaning if your property-buying partner also has an ISA, then you can collectively pool an impressive £6,000 towards the value of your home. This bonus is also tax-free.

How do they work?

Lifetime ISA:

You can put in up to £4,000 each year until you’re 50. That’s £1,000 more than with a Help to Buy ISA.

While you can withdraw money for reasons outside the allocated terms, you will need to pay a 25% withdrawal fee. This recovers the Government bonus.

Help to Buy ISA:

You can pay £200 per calendar month into your ISA.

Unlike other ISAs, you can withdraw money, so you don’t have to worry about having your money tied-up should you need to access it.

Your deposit allowance is capped at £200 per month. This means that even if you withdraw some money from the account, you won’t be able to pay anything else until the next calendar month.

A perk of the ISA is that you will earn interest from the bank in the same way you would with any other ISA. Also, unlike other Help to Buy schemes, you aren’t restricted on what type of property you buy. You simply have to be a first time buyer and stick to the allocated budget.

How and when do I claim the bonus?

Lifetime ISA:

You can withdraw the money if you are buying your first home, aged 60 or over or terminally ill, with less than 12 months to live. When buying your first home, the ISA provider will pay the funds directly to your conveyancer.

Help to Buy:

To claim your Help to Buy ISA bonus, you will need to instruct your property lawyer or solicitor when you are close to buying your first home.

Are there other affordable homeownership schemes?

As well as the Lifetime ISA, there are a number of affordable homeownership schemes available across England and Wales.

The full list of Government-backed opportunities includes:

  • A home for less than its market value if you’re a first time buyer
  • Shared ownership
  • A loan to help with the cost of building a home
  • A loan to help with the cost of a new-build home if you’re a first time buyer

To learn more about first time buyer mortgages and schemes and how they could help you buy your first home, contact the whole of market mortgage experts at Agentis today.