Should I pay off debt using first time buyer ISA?

kinkyfox

Hey guys,

I would like to ask for some advice regarding my first time buyer ISA. I have a loan with NatWest at 3.4% that I currently owe 6.8k. I plan to pay this off in the next four months, incurring an early repayment fee.

But my question is whether it would be better to pay this off immediately using the balance of my first time buyer ISA, for which I've saved around about the remaining balance of around 6.5k.

I do like the interest I get on my first time buyer but I'm not sure whether it would be better to be debt free right now. I do not plan to buy a new build house with the money anyway as I've read horror stories about premiums being added by developers and also the huge drop in equity when you decide to sell your second hand house.

Is it worth keeping the first time buyer and adding the 200 a month to continue getting the interest on it for the future?

Thanks,

John

eskbanker

If it's a Help To Buy ISA that you're referring to, then the 25% government bonus is somewhat more significant than the interest earned (and the interest on your loan), and it's valid for any first-time property purchase (up to £250K outside London or £450K within), so isn't restricted to new-builds.

If you don't raid your HTB ISA then how long will it take you to repay the loan?

kinkyfox

eskbanker wrote: »

If it's a Help To Buy ISA that you're referring to, then the 25% government bonus is somewhat more significant than the interest earned (and the interest on your loan), and it's valid for any first-time property purchase (up to £250K outside London or £450K within), so isn't restricted to new-builds.

If you don't raid your HTB ISA then how long will it take you to repay the loan?

Thank you eskbanker, I appreciate your reply so late on a Sunday night.

I will finish repaying the loan in around three or four months by overpaying, since moving back to the family home.

I wasn't aware that the first time buyer amount could be used towards a regular purchase, I was always led to believe that there were restrictions around it.

Would I be able to buy an older house from a regular sale and claim the government contribution of 25% on top? Could this be more complex?

Regards,

John

eskbanker

kinkyfox wrote: »

I wasn't aware that the first time buyer amount could be used towards a regular purchase, I was always led to believe that there were restrictions around it.

Would I be able to buy an older house from a regular sale and claim the government contribution of 25% on top? Could this be more complex?

You're perhaps confused by two similar-sounding government-sponsored schemes?

The Help To Buy ISA offers a 25% bonus to first-time buyers, regardless of age of the property they're buying.

The Help To Buy Equity Loan scheme involves a government loan and is only applicable to new-build home purchases.

If you're definitely meaning the HTB ISA then yes, your savings are boosted by the 25% bonus that you claim once ready to buy your first property, even if it's an old one, as long as it's within the property value limits mentioned above.

Further details at:
https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/
https://www.moneysavingexpert.com/savings/help-to-buy-ISA/

Presumably your reference to "moving back to the family home" doesn't suggest that you already own a stake in a property?

kinkyfox

I think I was confusing the two schemes you mentioned. This sounds much more positive! I don't currently have a stake in any other property, so will keep saving and use my help to buy ISA when I'm ready to purchase my first home.

Thanks so much for clarifying all of this!