Help to buy

Help to Buy ISA

With effect from 1 December 2015 first time buyers are now able to open a Help to Buy ISA, receiving a cash boost towards their first home from the Government. For those who are trying to get a foothold on the property ladder the ISA is extremely attractive, due to the generous 25pc cash boost by the Government.

How does the Help to Buy ISA work?

  • First time buyers who use the ISA to save for their first home will be handed £50 for every £200 they save. This is the most that can be saved each month.
  • The first £200 monthly payment can be boosted by an initial deposit of £1,000.
  • The bonus from the Government on the £1,000 will be £250.
  • The overall maximum amount the Government will contribute is £3,000. Therefore a total of £12,000 needs to be saved in the ISA to receive this.

How long will it take to get the maximum £3,000 amount?

  • It will take 55 months (just over four and a half years) for a first time buyer to save up the maximum £12,000, which will then be topped up by £3,000 from the Government. This is assuming the £1,000 initial amount is put in upon opening the ISA and £200 per month is invested after that.

Important facts:

  • There is no requirement to take out a mortgage with the Help to Buy ISA lender.
  • Only one Help to Buy ISA can be opened per person. Those who are buying with a partner or a friend can open one each.
  • The ISA can be transferred between different providers to procure a higher interest rate.
  • The bonus can be put towards homes with a purchase value of £250,000 or less. For properties in London this figure rises to £450,000.
  • The bonus cannot be used to pay other costs, such as legal fees. It can only be used towards the purchase price. First time buyers must take out a residential mortgage. It does not have to be a Help to Buy mortgage, but it can be.
  • According to the ISA rules savers cannot open both a new Help to Buy ISA and a cash ISA in the same tax year.
  • When the Help to Buy is closed the bonus is transferred to your solicitor, who completes the purchase of your home using the full bonus amount.
  • If you change your mind and don’t buy a property you will miss out on the bonus. The money put in will still be tax-free and receive the interest rate.
  • The minimum bonus is £400, so savers will need to open the Help to Buy ISA and then put £200 in each month for three months, plus the £1,000 initial deposit, to qualify.

If you would like further information or advice on the Help to Buy ISA, please call us.

Details taken from The Telegraph Money.

Like this article?

Share on Facebook
Share on Twitter
Share on Linkdin
Share on Email
Archives