Pick & Mix Your ISAs: First Time Buyers

As much as we love sweet treats, we’re not talking about a pick and mix from the local shop, we’re talking about ISAs – Individual Savings Accounts (ISAs).

 

Understanding ISAs can be complicated and knowing what you can and can't do with ISAs is an even bigger challenge, but approaching your ISAs like a pick and mix could help you save for your first home and all the other expenses that come with buying a house. Just like at that sweet counter, there’s a wide variety of choices that can seem daunting at first. And just like a pick and mix, you don’t have to limit yourself to one choice.           

Let’s start by getting a flavour of the different types of ISA available.

ISA basics

Let’s start with the ISA basics. What is an ISA? An ISA is a tax-efficient account that allows you to save or invest up to £20,000 each tax year, tax-free! There are different types of ISAs including Cash ISAs and Stocks & Share ISAs.

Cash ISAs are the more straightforward of the two and there is a variety of types, including fixed term ISAs, easy access and regular savers. It’s simply a savings account, but any interest made is completely tax-free.

A Stocks & Shares ISA allows you to invest in shares, bonds and funds, and like the Cash ISA any return made is tax-free. However these can be considered more risky than saving into a Cash ISA as investments can go up in value as well as down. Got it? Good!

Saving for a home

So, how can ISAs help you save for your first home? Well, let us introduce you to the Lifetime ISA, also known as LISA. A Lifetime ISA enables you to save up to £4,000 each year, tax-free, boosting your house deposit savings with a 25% government bonus, plus interest. You can receive a maximum government bonus of £32,000

The Lifetime ISA can only be used for your house deposit or retirement, meaning if you don’t need the full amount for your house deposit and want to withdraw it to furnish your new place, pay legal fees or pay removal costs, you will face a 25% withdrawal penalty.

LISA not for you? There are other options available, such as the Help to Buy: ISA, which allows you to deposit £1,200 then save up to £200 a month, topping up your savings with a bonus from the government. (Maximum bonus of £3,000). The Help to Buy: ISA won’t be available to new savers after 30th November 2019 and your bonus must be claimed by 1st December 2030 

Here's where the Pick & Mix comes in

One of the most exciting parts of owning your own house is putting your stamp on it and making it feel like home. No need for Mum or Dad’s input: this place is all yours! But as exciting as it all is, it still costs money.

This is where the pick and mix part comes in.

Usually you can only open one Cash ISA each tax-year, but with us you can open as many as you like, as long as you don’t exceed the £20,000 allowance.

This means under our CustomISA umbrella you can have a Lifetime ISA, which you can save into for your house deposit, then you can also have another Cash ISA which you can use as your furniture fund, moving costs or you could even add a renovation fund to the mix.

Beyond the house price: other fees and costs

It’s important to consider the costs of moving, so that you can plan for this. Yes, we know it may not be as exciting as a new sofa, but it’s a big part of the buying process.

So, how much does it cost to move? Well it all depends on different factors but the main costs will include*:

  • Valuation Fee: Your mortgage lender will assess the value of the property to determine how much they are willing to lend to you. Some lenders won’t charge for this, but if they do it is usually based on the property value; costing between £150 - £1,500.
  • Legal Fees: You will need a solicitor to carry out the legal work when buying a home, this can be costly, with legal fees typically costing £850 - £1,500.
  • Surveyor’s Fees: Before you buy a property it’s important to understand if there are any problems with the house, so you may wish to get the property checked by a surveyor. The cost of a Survey ranges from a basic home conditioning at £250 to a full structural survey from £600+
  • Removal costs: This ranges between £300- £600. If you wanted you could rent a van and do it yourself, roping in friends and family to help.

There are lots of different ways you can pick and mix your ISAs to make it work for you and help you get closer to owning your own home. We’re here to help so, if you have any questions, please direct message us on Facebook or give our team a call on 0345 734 4345.

*https://www.moneyadviceservice.org.uk/en/articles/estimate-your-overall-buying-and-moving-costs