Many people are finding it harder than ever to buy their first home and to help address this, in December 2015 the UK government announced the launch of the Help to Buy ISA, a special ISA designed to help first time buyers to save their deposit quicker by boosting their house deposit savings with government money.
What is The Help to Buy ISA
A Help to Buy ISA is a specialist government savings scheme specifically designed to help people buy their first home.
There are criteria for you to qualify for the Help to Buy ISA. These are:
• You must be classified as a first time buyer.
• You cannot own a property anywhere else in the world.
• You must be aged 16 or over.
• You can use it to buy any home worth up to £250,000 (£450,000 in London).
Some criteria may prevent you from opening a Help to Buy ISA:
• You can’t use a Help to Buy ISA if you’re going to rent out the property as an investment.
• You can’t use a Help to Buy ISA to buy an overseas property.
• You can’t have more than one Help to Buy ISA.
• You can’t open a Help to Buy ISA and a normal Cash ISA in the same tax year. You can transfer your cash ISA balance into your Help to Buy ISA however.
Like any other ISA, the help to buy ISA is a tax-free savings account but the government will add to your savings by 25%, up to a maximum value of £3,000 when you save £12,000.
The minimum amount you can save to qualify for the 25% government bonus is £1600, which will give you £400.
How Do I Get The Money?
When you have agreed a purchase, your solicitor will apply for the money during the conveyancing process. It has to be done at this point – you can’t apply for the money afterwards.
When the money is received it will be added to the total deposit you are putting towards your first home. The lender will then calculate your mortgage based on the deposit plus the additional money the government are contributing.
The maximum monthly contribution you can make to the ISA is £200 per month, meaning you can save £2,400 per year.
You can still save other money in separate accounts, but the Help to Buy ISA is limited to £200 per month.
When Can I Open a Help to Buy ISA?
The scheme will remain open until 30thNovember 2019, so as long as you apply before that date you’ll be able to save in the account. The government bonus is available until 2030 at present, so as long as it is claimed by then you’ll still have access to the money.
Opening a Help to Buy ISA?
Most of the major banks and building societies offer a Help to Buy ISA but do shop around for the best deal. If you already have an ISA, you can transfer the money into your Help to Buy ISA.
So if you are planning your first purchase do consider a Help to Buy ISA as the government windfall on your cash is significantly better than any interest rate you’d get on any other form of investment.