New Time Buyers

The new Help to Buy ISA scheme (HTBIsa) launched on 1st December 2015 aimed at property buyers saving for their deposit should help you get on the property ladder.  

The Help to Buy ISA scheme was announced in Chancellor George Osborne’s Budget in March 2015.  The Government believed that rising house prices and rising rents were making it more difficult for young people to get on the housing ladder and it was taking them much longer to save up the deposit they needed to secure any mortgage.

This new scheme, put in place to assist first time buyers, was launched on 1st December 2015 and the banks and building societies have launched their accounts with offers to entice first time buyers in and make these accounts the first choice when individuals are starting out in the property market.

They are essentially the same as a traditional cash ISA, so the interest will be free of both income and capital gains tax. The Government has also pledged to top up savings in these accounts, so when a saver takes money out to buy a property, the Government will add 25% to whatever is in the account, up to a maximum of £3,000 depending on how much you have saved.

The Halifax has offered an interest rate of 4%, compared with the Nationwide who has offered 2% but has also offered other perks, similar to Nat West, who have offered 2% interest but promises not to give bonus rates for new customers which don’t last long. These rates are variable, so they will change over time and it is worth doing some research before you buy.

So how does it work?

Firstly, you have to be a UK resident. You must be a first time buyer and have not owned any other property anywhere in the world. Also if you have a cash ISA which has been opened in the same tax year you will have to close it. You can transfer up to £1,200 into the HTBIsa.

It also must be purchased with a mortgage and not for buy to let purposes.  The maximum purchase price is £250,000 or £450,000 in London. You do not have to buy the property through the Government’s Help to Buy scheme.

When you first open an account, you can kick start it with anything up to £1,200, which does not have to be paid in one go. After this you can pay up to £200 per month.

An account can only be opened by an individual, so if a couple want to buy a property, they will have to open an account each. The possibility here is that if you are buying a house together you can then double the amount you will get from the Government if you are both saving at the same time.  The bonus is applied for by your solicitor or conveyance when you go to buy the property. The bonus is only applicable if you are purchasing a property, you will not get it otherwise.

These ISAs will be available until 30th November 2019 and all bonuses must be claimed by December 2030, so if you are saving for a deposit for a mortgage, talk to your adviser now to make the most of your savings.

It is always worth getting professional advice when it comes to borrowing. Even if it is just to get an illustration of how much your monthly repayments could be.

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