Month: October 2018

LISA: The Lifetime ISA

Ashanta Charm1 Comment

What is the LISA?

Reading Time: 1 min

ISA

This is an Individual Savings Account you can use to buy your first home or save for later life, like retirement.

You have a limit of £4,000 that you can put in each financial year until you are 50.

When you are 50, you will not be able to pay into your LISA or earn any bonus, however your account will stay open and you will earn interest on your savings.

Your annual ISA limit is £20,000, so the cap of the £4,000 LISA limit counts towards your annual ISA limit. Bare in mind that you are only allowed to open one ISA per tax year, so you lose out on £16,000 worth of tax free savings.

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

Terms and Conditions:

  • You must be 18 or over and under 40 to open a Lifetime ISA
  • You will be charged 25% if you withdraw money from your ISA for any reason other than:
  1. To buy your first home
  2. At aged 60 or over
  3. If you’re terminally ill, with less than 12 months to live

The withdrawal fee is to recover any Government bonus, essentially withdrawing money for any other reason than the above will result in you receiving less money than you paid in.

  • For first time buyers, the price of the property has to be £450,000 or less and you must use a solicitor or conveyancer to act on your behalf as the LISA provider has to transfer the funds directly to them.

 

Over the last few weeks, we’ve explored the various schemes available for First-time buyers/Home movers with the Governments assistance. If you’ve missed out, or have just joined us, feel free to catch up on the posts here:

 

 

Photo credit: homesandproperty.co.uk via Google search.

Help to Buy: Equity Loan

Ashanta Charm2 Comments

Help to Buy

Reading time: 3 mins

In this month of October, we have been solely talking about the various Help to Buy schemes available.

The Help to Buy initiative was a way of assisting young first-time buyers acquire their first home. At a time where it almost seemed impossible for the millennial to own a property in the ever changing and increasing property market, the government stepped in to lend a hand.

However, there is a catch. Nothing in life is free and that’s why it is important to know the pros and cons of any scheme you commit to.

These scheme consist of the following:

Help to Buy ISA

Lifetime ISA Post due 29th October

Equity Loan

Shared Ownership

Mortgage Guarantee Scheme Withdrawn November 2016

 

What is a Help to Buy Equity Loan?

 

The Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.

This scheme is available to First-time buyers and Home movers.

For example:

Purchase price: £200,000

Your contribution to the deposit: £10,000

The Governments contribution to the deposit: £40,000

Mortgage Amount: £150,000 75% LTV

Screen Shot 2018-10-21 at 12.15.30

You won’t be charged loan fees or interest on the 20% loan for the first five years of owning your home, however you will have to pay £12 management fees each year.

After 5 years, you will have to start paying back the 20% you initially borrowed, plus interest and your monthly Mortgage payments

ALERT

Things to bare in mind:

  1. Interest kicks in after five years, and could amount to a chunky sum over time.
  2. The Government will take the same percentage of the sale price as you opted for when you took out your equity loan (regardless of how much the loan was originally for) when the property is sold.
  3. You can repay part or all of the loan early, but the Government will only accept this if it’s a minimum of 10% of the property’s current value.

Help to Buy: ISA

Ashanta Charm3 Comments

fullsizeoutput_6

Reading Time: 3 mins

A Help to Buy ISA is something all First Time Buyers can benefit from. Whether you decide to use a Government Scheme or go the Standard Mortgage route, you can maximise your savings.

The Help to Buy ISA was an initiative the former Chancellor George Osborne and the Government set up to help First Time Buyers get on the property ladder in December 2015, however the scheme will be closed to new savers on the 30th November 2019.

You will only receive the Government bonus when you are close to completing on the purchase of your property.

The great thing is that a H2B ISA isn’t a per household account, but a per person account. So essentially, you and your partner can get a bonus as little as £600 or as high as £6,000

How much bonus will you get from the Government?

Savings below £1,600 = £0 from the Government as the funds are insufficient

Savings between £1,600 and £12,000 = A 25% top up from the Government

Savings over £12,000 = A £3,000 top up from the Government

Screen Shot 2018-10-15 at 13.33.52

How it works:

  1. You open your Help to Buy ISA
  1. Make an initial deposit of £1,2000 and the maximum of £200 per month there after.
  2. Continue saving. Build up a strong balance
  1. Find a property in your price range, make an Offer and go through the Home buying process
  1. When you are close to completing on your purchase, your solicitor will apply for your Government bonus.

Things to consider

It’s important to note that there have been many occasions where the bonus is not paid to the applicants until after completion has taken place.

Yes, they got the money and wasn’t scammed out of the scheme, however, the bonus funds couldn’t be used towards the deposit.

If you don’t particularly need the bonus to make up your deposit, this is great as you’ll have funds available to kit out your new home and buy some very needed furniture, accessories and electronics after completion.

The downside is that if you had calculated the bonus in to the mandatory deposit amount which is quite time sensitive in acquiring around exchange etc, then you can find yourself in a bit of a pickle.

Your maximum ISA allowance per tax year is £20,000 – this includes a standard Cash ISA, Lifetime ISA and Help to Buy ISA*

*You cannot get a first-time buyers bonus on both the Help to Buy ISA and Lifetime ISA

Screen Shot 2018-10-15 at 13.39.34

What to do?

If you’re a First Time Buyer, I’d 100% say to open a Help to Buy ISA NOW even if you have no desire to get on to the property ladder any time soon

Don’t depend on the ISA to complete/make up your deposit

See the Help to Buy ISA as a post completion fund. A fund to kit out your new home and cover any post completion unexpected expenses.

Stamp Duty: The Perks of being a First Time Buyer

Ashanta Charm1 Comment

Before you commit to buying your first home, stop, think and calculate!

Reading Time: 2mins 

The flat you can buy today on your current budget, equates to a house in a few years of patient saving.

As soon as you use your First Time Buyer rights, that’s it, they’re gone. Any property you buy thereafter will fall victim to *higher Stamp Duty rates.

After the Autumn 2017 Budget, it was announced that First Time buyers will not have to pay stamp duty for the first £300,000 of their purchase and £5,000 less on a purchase between £300,000 and £500,000.

The image below shows a representative example of how Stamp duty is calculated for a £500,000 property:

Screen Shot 2018-10-06 at 15.32.13

Any property over £500,000 is not eligible for Stamp Duty relief. So a £600,000 property would be subject to a hefty £20,000 stamp duty bill.

If you decide to buy a second home or a Buy-to-Let property, you will also have to pay an extra 3% stamp duty on top of the current rates for each band.

Below is a table for *standard Stamp Duty bands:

Minimum property purchase price

Maximum property purchase price

Stamp Duty rate (only applies only to the part of the property price falling within each band)

£0

£125,000

0%

£125,001

£250,000

2%

£250,001

£925,000

5%

£925,001

£1.5 million

10%

Over £1.5 million

12%

Patience is indeed key here.

Moving slightly away from stamp duty, as a first-time buyer there are also preferential Mortgage rates and products for you. Combining these deals with your discounted stamp duty, you are making a whopping saving as a first time buyer and shouldn’t let anxiety or this competitive nature that many millennial’s have distract you from your goal and ultimate saving opportunity.

Think about longevity, don’t live in the now.

Why buy an “okay” flat now for £150,000 (that you only intend to live in for 3 years) and waste your stamp duty discount, when you can buy a £300,000 property that you are much happier with in 2 years time a live a foreseeable future in?

Stop, think and calculate.

Selling your property

Ashanta Charm1 Comment

fullsizeoutput_4

Home Mover

Reading Time: 2 mins

Selling your property can be basic, however with so many different schemes and second charges, there are multiple factors to consider.

Today we are going to focus on a basic sale.

You are either:

  1. A home Mover
  2. Deciding to sell and rent going forward/move in with family.

“I’m not too sure about when, but I know that I want to sell my property this year”.

“I’ve got my eyes on a property, I’m ready to make an Offer, but I haven’t even put my property on the market yet”.

“I want to move, but I haven’t got my eyes on a property just yet, they’re just not ticking all of the boxes”.

My answer to all of the above is to get in touch with the local Estate Agency’s in your area and put your property up for sale.

Once it’s up, you can always take it down if you change your mind. The longer you procrastinate doing nothing, no one is viewing your property, no one knows you’re considering selling up and once you see a property you are interested in and tight deadlines follow, you’ll be anxious and overwhelmed with the process.

STEP 1: Contact local agents and explain your situation

STEP 2: Get them round to view your property and give you a rough idea of what your property is worth, what properties in your area have been sold for of late

STEP 3: Understand the agents charge policy. Some charge 1% of the sale price, other 0.5%, 0.25% etc and there are a variety of packages including pictures, Zoopla listings etc that you need to be aware of

STEP 4: Solicitor – find one. Just like with a purchase, you’ll need a solicitor to act on your behalf. They will liaise with the buyers solicitors to arrange particulars of the contracts, exchange and completion dates.

STEP 5: Funds – Once the sale is done and monies are received, your solicitor will pay off your existing Mortgage and the excess will be yours.

STEP 6: Buying a new home – The excess funds will be used as a deposit towards your new home. That’s why it’s important to sell and buy simultaneously.

OR

STEP 6: Renting/Moving in with family – The excess funds will be wired to the account of your chance savings, current, bond etc.

FAQ’s

What about Tax?

Private Residence Relief. You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply: you have one home and you’ve lived in it as your main home for all the time you’ve owned it. you haven’t let part of it out – this doesn’t include having a single lodger.

What if I bought my house under a government scheme or have a second charge in place?

Consult a solicitor. One that specialities in properties sold under your scheme/second charges before you put it up for sale. You need to understand the process, legalities and personal cost to you.