In this article, David Wilson Homes helps to clarify information for those saving for their first home.
The Help to Buy ISA, launched in December 2015 was introduced to encourage buyers to save for a deposit for their first home, with the incentive of a 25% bonus from the Government to boost savings.
News of the Lifetime ISA (LISA), available from April 2017, followed shortly after with the aim of helping savers with a deposit for their first home and/or to save for retirement, again with a 25% bonus provided by the Government.
Chris Hatfield, Managing Director at David Wilson Homes South Midlands, said: “This is the perfect time for people to start thinking about buying their first home. Both ISAs offer a fantastic bonus scheme, boosting savings and allowing first-time buyers to get more for their money. There is a lot of help out there to get people onto the property ladder and we would encourage buyers to take the time to consider the options available to them.”
David Wilson Homes has teamed up with mortgage specialists Grange Mortgage and Protection Services, to put together information for first-time buyers to take into account when considering opening either ISA:
Age
HTB ISA: Anyone aged 16 and over can open a Help to Buy ISA providing they fit the eligibility criteria and will be able to contribute to it until 2029.
LIAS: Lifetime ISAs are available to anyone between the ages of 18 and 39. Those whose birthday falls on or before 6th April 2017 will miss out.
Contributions
HTB ISA: Following an initial deposit of £1,000, up to £200 a month can be contributed to the Help to Buy ISA, up to a maximum of £12,000.
LISA: Up to £4,000 can be saved each year in the LISA, with no monthly cap, until the saver turns 50. Over a lifetime this could result in £128,000 saved.
Government bonus
HTB ISA: The maximum Government bonus available from a Help to Buy ISA is £3,000, providing the account owner has saved the full £12,000 limit.
LISA: The Lifetime ISA is rewarded with a maximum bonus of £1,000 per year based on £4,000 being saved and is paid yearly from the age of 18 until the saver turns 50 – meaning a maximum of £32,000.
In both cases, the bonus is calculated per person and not per house, so two people buying together can benefit from two Government bonuses.
Length of contribution
HTB ISA: Accounts can be opened until 30th November 2019 and contributed to until 2029, until the balance reaches £12,000 including interest.
LISA: Savers can open the account between the ages of 18 and 39, but the bonus will only be paid on contributions until they turn 50.
Withdrawal
HTB ISA: Money can be withdrawn from the HTB ISA at any time, but can't be replaced in the same month – maximum monthly contributions still apply. There's no fee for withdrawal but bonus will be lost on the amount. When using the savings for a home, a solicitor will apply for the bonus on the applicant's behalf.
LISA: An initial 12 month holding period will apply before account holders can withdraw money that includes the Government bonus for a first home or retirement. When using the money for a home purchase, withdrawal must be paid to the conveyancer. Any withdrawals not for either purpose will lose the government bonus, including interest and a 5% charge will apply.
Property value
HTB ISA: Homes can be bought up to the value of £250,000, or £450,000 in London.
LISA: Using the Lifetime ISA, homes can be bought up to a maximum of £450,000.
Daniel Mumford, Director at Grange Mortgage and Protection Services, said: “The Help to Buy ISA has been a promising move by the Government to boost the new build sector and encourage first-time buyers onto the housing ladder. I do however feel that the Lifetime ISA has more potential scope in terms of the higher level of annual savings that can be made and the higher purchase price limits, which make it more appealing to a wider geographical area.”
