This is a guest post written by Ann Carr. The views expressed in this article are not necessarily shared by Property Moose or DFI Financial Services.
With house prices rising year on year, many people are finding it harder than ever to buy their first home.
Knowing this is a problem that has been around for a long time, in December 2015 the UK government announced the launch of the help to buy ISA, a special ISA designed to help savers get on the property ladder sooner by boosting their house deposit funds with government money.
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. It’s an account designed to speed up the time it takes you to save up your deposit.
There are criteria for you to qualify for the Help to Buy ISA though…
- 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).
- You can use a Help to Buy ISA with any mortgage; you’re not restricted to a Help to Buy mortgage.
Like any other ISA, the help to buy ISA is a tax-free savings account. The difference here is that the government will boost 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.
If you take advantage to of the scheme fully, you’ll be able to turn your £12,000 deposit into a £15,000 one!
How Do I Get The Money?
You don’t. Your solicitor or conveyancer will apply for the money when your offer on a new home has been accepted. It has to be done at this point – you can’t apply for the money afterwards as it is too late.
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?
Any time you like, but the sooner the better! The scheme will remain open until 30th November 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.
How Can I Open a Help to Buy ISA?
All of the major banks and building societies will offer a Help to Buy ISA. Their rate of interest will vary of course, but they will be easy to set up.
If you already have an ISA, you can transfer the money into your Help to Buy ISA, giving it a nice little boost to start with!
For the best rates on Help to Buy ISA’s, you can always check out Money Supermarket, where you’ll find the best rates available on the market.
Who Can’t Have a Help to Buy ISA?
There are certain exclusion criteria for the Help to Buy ISA, so check that none of the following apply to you before you try to open one….
- 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.
Once you have checked that the inclusion and exclusion criteria make you eligible for a Help to Buy ISA, either apply in store or online and start saving!
If you are in the position to take advantage, it’s certainly worth your while doing so – the government bonus on your cash is significantly better than any interest rate you’d get on most savings products in the market.
Anwyl Homes are a leading house builder with developments across North England and Wales. For more information on how you can apply for help to buy a new build house contact their team.