Now that the Help to Buy Equity Loan Scheme has been retired, as a first time buyer in Middlesbrough, you may be wondering what other government schemes are available to help you get onto the property ladder. In fact, there are many different mortgage schemes out there that can help you with this!
Recent scheme introductions include the Shared Ownership Scheme, Mortgage Guarantee Scheme and the Lifetime ISA, just to name a few. In this article, we are going to focus on the Lifetime ISA, looking at how it can help you get a mortgage in Middlesbrough.
The Lifetime ISA is not technically a scheme. ISA stands for independent savings account and you will be using this account to help you save for your mortgage deposit. The funds within the savings account can only be used for two things: purchasing your first home or saving for later in life. As a mortgage broker in Middlesbrough, we can only assist you with purchasing your first home.
Each week, month or year you can deposit money into this account, with the maximum total that you can save per year being £4,000 (£333 per month). Once you have saved for a year, the government will top up the total you have saved by 25%. This means that if you managed to deposit the maximum, the government will add £1,000 to your ISA. If you do not manage to save up £4,000 in the year, don’t worry, the government will still top up your ISA with 25% of what you have saved.
Once you are ready to start looking for properties and have reached your deposit target, make sure to keep the funds in your account. Your mortgage lender will need the funds to remain inside of the Lifetime ISA when processing your mortgage application.
The funds will first be used to cover conveyancer and solicitor fees, then the remaining amount will contribute towards your mortgage deposit. We have seen many first time buyers in Middlesbrough save up for a few years before making a move onto the property ladder to get the most out of their deposits and Lifetime ISA.
If you are planning to purchase a property in Middlesbrough with a friend or family member, you may be able to combine Lifetime ISAs to create a higher initial deposit. If the person you are buying with already owns or has legal interest in another property, they will face a 25% withdrawal charge to use their Lifetime ISA savings.
When it comes to government schemes, you will need to meet their requirements before you are able to access them. When opening a Lifetime ISA with the means to purchase your first property, there are a few that you need to meet in order to qualify:
The Lifetime ISA is tax-free, therefore, your money grows at no cost to you. However, if you decide to stop depositing into your account and want to take some of it out, unfortunately, it will cost you.
You will receive a 25% withdrawal fee on the money that you withdraw from your Lifetime ISA. This fee will only affect the money that you have added to the ISA. For example, if you managed to save £4,000 in a year and you receive £1,000 from the government if you later want to remove £5,000 from the account you will be charged £1,250 to withdraw this amount. Remember that £1000 of this £5,000 was gifted to you by the government bonus, so you’re losing out on £250, not £1,250. You would be left with £3,750 and lose the bonus from the account you had built up over a year.
As a mortgage broker in Middlesbrough, we would recommend that you only put what you can afford to put into your ISA. In the scenario above, the account holder has just lost out on £1,250 towards their mortgage deposit, which can be a lot of money these days!
The Lifetime ISA is all about saving for a mortgage deposit. Whether you are planning to buy a property for yourself or with a partner, it is a great approach to getting a mortgage as a first time buyer in Middlesbrough.
You should remember that you will still need to find a mortgage product to go hand-in-hand with your new home, and using a mortgage broker in Middlesbrough like us can help you do just that. Simply reach out to our team and let them know your Lifetime ISA situation and when you are planning to begin your mortgage journey.
Our mortgage advisors in Middlesbrough would be more than happy to talk you through the process and get you started on your first time buyer mortgage journey!
Date Last Edited: August 16, 2023