When you are a newly married couple wanting to buy their own home, sometimes your expectations and reality collide. It usually isn’t as easy as people think it will be, people with joint incomes can still struggle to buy a home. Luckily, first-time buyers can get either a Help-to-Buy ISA but there is also a Lifetime ISA available. These are designed to help you reach your target funds and begin the process of buying your own home.

Arranging Finances

In the New Year, many people begin organizing their pocketbooks. Getting your finances in order for the process of buying a house can even more difficult. With the boost of a Help-to-Buy ISA, you can begin saving to purchase a home.

Help-to-Buy ISAs

While Help-to-buy ISAs often have some of the worst interest rates, with around two-and-a-half to three percent being a good rate, they can save prospective home-buyers up to £3,000 on savings up to £12,000. This is a 25 percent subsidy from the government that provides up to £6,000 for a couple with £24,000. This is probably the best feature for couples looking to buy a home. It’s easy to see why they have been so popular, the British government has hailed them as a success and citizens benefitting from high percentage bonuses.

Arguably the most important component of taking out an ISA is deciding which bank to choose. The larger, well-known banks like Nationwide, Barclays, and Virgin offer the 2.5 percent interest while lesser-known building societies charge from 2.85 to three percent. There are, however, restrictions on where you can buy and how much you can spend there. While in London, up to £450,000 can be spent, outside of the capital you can spend up to £250,000.

In addition to these rules, people who save for a home can only access the funds from the government by instructing a solicitor or a conveyancer during the process of buying a home. The bonus is added to the mortgage and the other funds are used to pay for the property transaction. While the Help-to-Buy ISA helps new buyers purchase a home without a lifetime commitment, the Lifetime ISA can provide a total subsidy up to £32,000, which many people think is a better deal.

Lifetime ISAs

The Lifetime ISA (LISA) allows you to save up to £4,000 a year, 25 percent on everything you save. For these ISAs, the money can be used to buy a first property or saved for retirement. While this appears to be the better deal if you are planning far ahead when buying a house, it does have its drawbacks. For example, you have to apply for the LISA before you are 40.

Another drawback is the large penalty for making early withdrawals. Taking out money before you reach age 60 and without using it to buy your first home, you will pay a reciprocal 25 percent penalty. If you save £4,000 in a year and receive the £1,000 maximum bonus, you would get charged 25 percent on the new total of £5,000, costing you £1,250. The only time this withdrawal penalty doesn’t apply is when someone has a terminal illness or dies.

If you already have an ISA and want to switch to a different bank or building society that offers a better interest rate or terms, you should tell the new bank that you are interested in switching to them. According to MoneyPug, a site commonly used the find the best ISA rate, the new bank should organise the transfer for you. Due to the early withdrawal charges, it is not a good idea to close an existing ISA and open up a new one. This way you use up a new subscription, therefore using some of your annual ISA allowances as well.

You can receive the maximum bonus, £32,000, by paying the maximum £128,000 for 32 years from the age 18, which is not a short commitment. This is why many couples choose to get double the savings with a Help-to-Buy ISA. For most people LISA is better for saving on a pension rather than a first-time buy. It particularly helps the self-employed, who don’t have a pension or contributions from a company.

Help-to-Buy Cons

The Help-to-Buy ISA is more helpful to couples looking to buy a home for the first time, but it is best to know about its flaws in order to get the largest bonuses possible and stay up to date with interest payments. People saving with a Home-to-Buy ISA can put up £1,200 during the first month and £200 after that. While it is okay to save less, you must have a minimum of £1,600 saved to qualify for a bonus. You also need to save regularly, missing months will prohibit you from making up the difference. Still, even with these minor conveniences Hel-to-Buy ISAs can help new couples save for a home and receive 25 percent on their savings.