Understanding Help to Buy ISA’s

With the cost of buying a property ever-increasing, the government have set about a new way of helping first time buyers onto the property ladder.

First time buyers are the cornerstone of the market, the glue if you will that holds the market together and often the place where the chain begins. Without these first time buyers the market stagnates and people find it difficult to move. So what happens in today’s market when first time buyers are finding it increasingly difficult to get on the ladder due to the financial constraints that came out of the last recession? With lenders tightening up on lending, the cost of housing rising and those all-important deposits increasing the government introduced the Help to Buy ISA, which aim to help boost your savings with a government input of 25%. You will also be able to earn up to 4% interest tax-free on your savings too. As a side note: there are a number of lenders who are offering just 5% deposits for both first time buyers and home movers, making it easier for first time buyers to get onto the property ladder.

You can open a help-to-buy ISA at most banks and building societies, and you can check online to find out your eligibility status. Each first time buyer will be eligible, rather than it being assessed per household, so if you are buying with your partner you could double your government bonus by opening an account each. If you are first time buyer hoping to buy with someone who has owned before you are in luck as you can open a Help to Buy ISA but they will not be able to. You will need to deposit a lump sum of £1200 in your first month to open the account and be eligible for its benefits and you can save up to £200 per month, and no more, into you Help to Buy ISA but you are not required to do this monthly.

When you find yourself in a position to buy your first home you will need to close your Help to Buy ISA account and wait to receive your closing letter from your provider which you will need to give to your solicitor or conveyancer. They will then be able to apply for your government bonus, and once received will be added to the money you are putting towards your first home. The minimum government bonus you will receive is £400 and that would be on savings of at least £1600 and this increases on a sliding scale up to the maximum government bonus of £3000 if you have saved £12,000.

To be eligible to open the Help to Buy ISA you must be a UK resident with a valid national insurance number, be over 16 years of age, be a first time buyer and own no other property and not have another active cash ISA. To be eligible for the government bonus the property you are intending to purchase must be in the UK, cost no more than £250,000 (or £450,000 if you are buying in London – which is limited to inner and outer London boroughs), must not be a second home or a buy-to-let property, not be rented out after you purchase it and it must be purchased with a mortgage (although it does not have to be a Help to Buy mortgage, but it can be if you chose). The Help to Buy ISA scheme is available until 30 November 2019 and your government bonus must be claimed by 1 December 2030.