Property Picking

How many people can say they’ve got a plan for how they’re going to retire early or how they’re going to buy their first property?

I can’t even lie these are questions that I’ve recently been asking myself. Maybe it might relate to you also, but I think we’re currently living in a generation where not enough people are financially literate. Realistically this isn’t our faults because none of this was taught to us when in school, but we need to learn how to use our money to invest or save properly. 

Financial literacy is such a broad topic that I can literally write a dissertation on. But realistically neither you or I have the time for that so, I’m just going to talk about the benefits of saving correctly using two different types of ISA’s (Help To Buy ISA and Lifetime ISA).

An ISA is an individual savings account that banks offer us to save our money. The reasons I’m highlighting these two ISA’s is because of the benefits you get with opening them. I didn’t even know about these two accounts until a friend of mine introduced me to them. Always good to have people around you that stay educating you!

Let me start with the Help To Buy ISA; when saving to buy your first home, if you save into this ISA account the government boosts (adds) what you have saved by 25%. The maximum you can place into this ISA is £12,000, therefore the maximum government bonus you can receive is £3,000. Simple maths because 25% of £12,000 is £3,000. As you may know houses are very expensive so how can we pass the opportunity to receive TAX-FREE money to put towards buying our first home. 

There’s a few ‘rules’ that come with this ISA. For the first month you open your account you can place a maximum£1,200 and then the months after it is a maximum of £200 each month. To qualify for the government bonus, the property must be capped at £250,000 or £450,000 if purchasing a house in London. You must also be a first-timehome buyer to be eligible for the bonus and can only claim the bonus if buying a house. Lastly this ISA becomes unavailable from the 30th November 2019 and you can continue saving up until the 30th November 2029. So, if you are interested in opening this account, I would act fast.

Moving onto the Lifetime ISA which is my personal favourite, with this account the government also give you a 25% bonus on the total amount you pay into your ISA. You can save a maximum of £4,000 each year into this account and you are able to pay into this up until the day before you turn 50. The potentials of this bonus are very large, for example if you are 20 and save £4,000 (£333 monthly) each year for 30 years, you’ve saved a total of £120,000, 25% of this is £30,000 of TAX-FREE money topped up onto your account. Tell me right now that’s not crazy… With this ISA you are also able to put this money including the bonus towards buying a house if a first-time buyer and the property is capped at £450,000. Or you can just use this as your retirement money as you are able to access this account and withdraw from it freely once you have turned 60. This ISA is not designed to encourage regular withdrawals, unlike the Help To Buy ISA if you want to withdraw money you are charged 25% of the amount you want to withdraw.

Sadly, you are only able to use either the Lifetime ISA or the Help To Buy ISA bonus towards your house, you can’t use both. This just covers the basics of these two ISA’s obviously if you do your own research there’s more to learn, but I highly recommend you to at least open one of the two because a 25% bonus can really add a lot! 

I’m sure that some people will finish reading this and think I don’t really need to start saving now but I’m telling you the earlier you start the better rewards you’ll get in the future. Even if it’s just taking the first step to open the account, this is better than nothing.

I’m no financial expert but when my friend introduced me to these, I was surprised I knew nothing about this and I’m sure many others don’t either so it’s always good to spread the word to those around you if it can benefit them.

Much love,

The RealTalk Blog Team

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