In the Spring Budget 2015, the Chancellor George Osborne announced that the Government would be introducing a new Help to Buy ISA this year, and this saving scheme launches today. Help to Buy ISAs are designed to give first-time buyers an extra boost when they’re buying their first home. If this sounds like something you’d be interested in, we’re going to walk you through how this new initiative could help you.
Help to Buy ISAs
The scheme is designed to provide you with a boost to whatever you save towards your first home. If you save money into a Help to Buy ISA, the Government will top it up by 25%. The maximum that you can save is £200 a month, so if you put this away each month the government will top this up by £50 each time.
For the first calendar month that the Help to Buy ISAs are launched, you can save an extra £1000 meaning that you could increase what you put away to £1,200. As £200 is the monthly limit after this point, you will only be given a boost of £3,000 by the government when you save up to £12,000. You are able to save more than this though and it could be worth doing if your ISA has a competitive interest rate. The minimum amount that the government will add to your ISA is £400, meaning that you’ll have to save at least £1,600 to receive this. It’s important to note that the Help to Buy ISAs are available for each first-time buyer and not per house. So if you’re buying a home with a partner, you’d be able to get a £6,000 boost towards your home between the two of you. Whatever bonus you receive from this scheme will go straight to the mortgage lender and you’ll only ever be able to benefit from it if you do come to buy a home in the future. It's also important to note that it can't actually be used until the sale has completed so it's not for the housing deposit.
In anticipation of the launch today, 14 organisations have signed up to provide these Help to Buy ISAs. Halifax have come forward to offer a 4% interest rate on its ISAs, while Nationwide and NatWest have said they’ll pay 2% interest to prospective homeowners. Be aware though that these rates of interest may change going forward.
As we’ve said you need to be a first-time buyer to qualify for the Help to Buy ISA and you must also be over the age of 16. The ISA can be used to buy any home worth under £250,000, or under £450,000 in London.
A Help to Buy ISA doesn’t have to be used in conjunction with a Help to Buy mortgage but you won’t be able to open a Help to Buy ISA and a normal Cash ISA in the same tax year. If you already have an ISA this year, you won’t be able to transfer more than £1,200 held in in into a new Help-to-Buy ISA. The accounts can be opened from today (December 1st) to 30th November 2019. To receive the bonus you must use the money to buy a house before the end of 2030.
If you decide against buying a home, the ISA can be closed and the money withdrawn to use for something else but try to avoid doing this (and risk losing the additional bonus) if you intend to buy a property in the future.