The scheme involves first time buyers setting up an ISA and saving up to £200 per month. The buyers’ savings are then boosted by 25% by the government once the buyer is in a position to buy a house.
Take a look at House Network’s information about the Help to Buy scheme below to see how it could benefit you.
To become eligible for the Help to Buy ISA, it is required that you must:
The Help to Buy scheme is open for first time buyers until 2019 and a range of different banks and building societies are offering Help to Buy ISA accounts, each with different interest rates. Each first time buyer has Help to Buy eligibility, so even if you and a partner are planning to buy a house together, you can both open an account and save double the money. Although, you do have to be a first time buyer to be able to open an account.
You can use the ISA if you’re looking to buy a property with the following criteria:
The scheme is great because it means that first time buyers can save a deposit to buy a house much quicker than without. In the first month you can deposit up to £1,200 in to your ISA to start off your savings and you can draw money out of the ISA at any time, so it’s not a binding savings account.
The government bonus is given to you when you chose to close your Help to Buy ISA account and as the scheme excludes people looking to buy second homes and buy-to-let properties, it gives first time buyers a fairer chance of getting on the property ladder.
It’s flexible, so even if you choose to close your account very early on, as long as there is a minimum of £1,600 in your account you will still be able to receive the minimum £400 bonus.
If you save up and don’t choose to buy a house with the money in the end you’ll still benefit from the interest gained from the account, just not receive the government bonus.
If for some reason your house purchase does not go ahead you can put your money back into the ISA until you’re ready to buy again.
Although the Help to Buy mortgage scheme is really helpful for a lot of first time buyers, there are some cons to it which make it not the right savings scheme for everyone.
If you already have an ISA, you will have to take extra steps to have both an ISA and a Help to Buy ISA open in the same tax year. Any money saved in your ISA will have to be transferred to your Help to Buy ISA up to a value of £1,200 and any money over the £1,200 value will need to be put into either a non ISA account or a different kind of ISA, such as a stocks and shares ISA.
You can only save a maximum of £200 a month which can be limiting for some people who’d like to be able to save more and will need to do this in other accounts. On top of this, if you don’t save any money for a few months, you can’t deposit a lump sum of a few month’s £200 payments in one go.
So unless you have a regular income and know you’ll definitely be able to save £200 a month, it might take you longer to save using the ISA than a normal account where you can deposit large sums into when you have extra cash.
The maximum government bonus is capped at £3,000.
If you’re interested in setting up a Help to Buy ISA, why not use an online Help to Buy calculator to help you calculate your deposit and work out just how long it would take you to be able to save up for your dream home.
Image courtesy of iStock
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