3 Tips To Help You Save For A Mortgage Deposit
Do you want to save money for a deposit for a mortgage and your first home – well these three tips are the perfect way to get on the ladder.
Help to Buy ISA
This is designed to help individuals who are saving to buy their first house. They are available for first-time home buyers over 16 years old. The government will add a bonus of £50 into a Help to Buy Isa for each £200 that is saved within the account, up a maximum savings of £12,000. That means that savers can potentially benefit for a bonus as high as £3,000. This bonus is available on properties with a maximum value of £250,000, or in London to £450,000. It is paid whenever you purchase your first property. The accounts are not per property but per person. Therefore if individuals purchase a property together they can each receive the bonus. To open an account, the initial deposit can be up to a maximum of £1,000 and then every month after that you can pay in as much as £200.
The Help to Buy Isa has another benefit. Unlike other types of Isas, the interest that you earn is tax free. For 2015-2016, you can save £15,240 maximum in an Isa. So you can see there are many benefits of an investment ISA.
Warning: If you have added money already into a cash Isa during the 2015-2016 tax year, which began on April 6, you may not be able to start contributing until April 2016 to a Help to Buy Isa. Some banks however, like Nationwide and Natwest, are offering current customers the chance to pay into both kinds of Isa, so before you choose a provider be sure to review the terms and conditions.
How To Use A Savings Account To Save For Your Mortgage Deposit
Quite often regular savings accounts pay attractive interest rates and be a great way to ensure you are putting aside money each month. However, they often come with restrictions that you need to be aware of. For example, there might be limits on how many withdrawals can be made every year, you might need to have an account currently with the bank, and if you miss depositing into your savings one month you might end up receiving less interest.
Fixed Rate Savings Accounts Vs. Instant Access For Saving For Your Mortgage Deposit
If you have a small lump sum already built up, then you know it is going to take a couple of years for you to save the remainder of the deposit. You can get a better interest rate by locking away your money for one year or longer. Here are some tips.
For your lump sum, consider a one to two-year fixed-rate fixed-term interest savings account. Then use a regular savings account or cash Isa allowance for the rest of the needed deposit.