Tax free saving for first time buyers deposit
Nationwide Building Society has launched an ISA version of its Save to Buy account for first time buyers.
The company said that it means that they can take advantage of their tax free ISA allowance while also getting the opportunity to apply for a Nationwide mortgage with a lower deposit of just 5% (95% LTV).
Available to open through any Nationwide branch, the Save to Buy ISA is guaranteed to pay 2% above the Bank of England Base Rate, so at launch the account will pay a competitive rate of 2.5% AER tax free on balances of up to £20,000.
This is the same rate as the regular savings Save to Buy Account, therefore ensuring that savers have the opportunity to take advantage of their tax free allowance.
The account can be opened with £50 with customers having to save at least £50 per month towards the deposit for their first home. Customers also have the flexibility of not paying the minimum monthly amount for up to three months during a rolling 12 month period.
A cash back offer of up to £1,000 will also be available through the Save to Buy ISA. To qualify for the full cash back reward of £1,000, the first time buyer(s) will need to save at least £10,000 in the account and go on to take out a Nationwide mortgage up to 95% LTV.
There are three ways in which first time buyers can take advantage of the Save to Buy ISA and still qualify for the full £1,000 cash back. Joint mortgage applicants can combine ISA balances, so a husband and wife applying for a joint mortgage can each have up to £5,340 in individual Save to Buy ISAs per tax year.
Single mortgage applicants can open a Save to Buy ISA account, save their full cash ISA allowance of £5,340, and then open a standard Save to Buy Account to save the remaining amount in order to reach the threshold for maximum cash back. Save to Buy ISA also allows consolidation of existing Nationwide ISAs.
The mortgage element of the account remains the same, so for first time buyers to be eligible to apply for a Nationwide 95% LTV mortgage, they must have been saving in a Save to Buy account for between six months and three years. Save to Buy customers will also qualify for any standard Nationwide first time buyer deals available at the time, for example the current £500 product fee discount.
‘When you’re saving for that first home, every penny counts, which is why we’ve launched an ISA version of our popular Save to Buy account. Now savers can take advantage of their tax-free savings allowance while also making themselves eligible to apply for one of Nationwide’s 95% LTV mortgages,’ said Martyn Dyson, Nationwide’s head of mortgages.
‘As one of the country’s leading mortgage providers, Nationwide is committed to doing more to support first time buyers by offering them a tax efficient way to save for that first home,’ he added.