In the latest Budget, the Chancellor announced that there is a new ISA being set up to help first time buyers. They are being offered up to £3,000 each to put down as a deposit on their first home.
Why is this good news for first-time buyers?
Anyone saving for their first home will have their money boosted by a payment from the Government at the point of purchase. This bonus will be equal to 25% of their savings, so for every £200 they save, the Government will give them £50.
The maximum amount of money that you can put into this ISA is £12,000. With the Government’s top up, this will take it to £15,000. Of course, because it’s an ISA, you will also benefit from the interest on the savings as well as the bonus.
This is a personal bonus, so a couple buying a house together will get double, up to £6,000 towards their property.
What is the catch?
So, what are the qualifications for this? It’s simple really. You need to be 16yrs and over and you will never have owned a home.
It’s got to be for your first home, you cannot put it towards a buy-to-let property even if you don’t have another home.
There is a cap on the price of the houses that it can be used for. The cap is £450,000 in London and £250,000 everywhere else in the UK.
This scheme will be open to new account holders from this Autumn and available for 4 years. Once you have opened an account it will be valid until you are ready to buy.
You can withdraw some monies from this, but you will not get the bonus until you are ready to exchange contracts.
If you currently have a cash ISA you cannot have this one as well in the same tax year, however if you are a basic tax payer, the changes in the budget allow you to save an additional £1,000 tax free alongside a tax ISA. It’s worth just having the one ISA.
They will be available from banks and building societies and you will be able to transfer monies from existing ISAs.
It sounds like you have to have a lot saved to start?
You don’t need to have thousands in the bank already to make it work for you, however the minimum contribution is £400, so you will need to save £1,600 yourself to begin with, but if you are saving for your first house, you will be looking at this amount of money already. When you first open an account, you can put any amount in up to £1,000, then you can pay up to £200 per month. To get the maximum bonus from the Government, you need to save for 5 years while putting in £200 per month.
According to the Council of Mortgage Lenders, the median deposit for first-time buyers is £25,500. If a couple chooses to use a help-to-buy ISA, they will get up to that amount more quickly or even increase the amount they can put down by £6,000. It makes sense that having a large deposit can help you qualify for a lower interest rate on your mortgage.
If you are looking for your first mortgage, speak to us to see what you realistically can afford and from there you can work out what deposit you will need. evolutionforwomen.co.uk