When trying to get on the property ladder, the hardest part is taking the first step. Saving up for that initial deposit can take a lifetime, whether that’s due to high rent costs, the rising amount needed for the deposit or you simply can’t save the required amount. Unless we win the lottery or fall into some money it can seem impossible to finally own your own home. Thankfully, to help you get there, the government has set up the Help to Buy ISA. This scheme is designed to help first-time buyers by adding another 25% of your savings on top, however, time is running out!
How do they work?
This government scheme is designed to help first-time buyers get on the market and buy their first house, whether it’s new or old. The basis of this scheme is that the government will top up any contributions you make by 25% with a maximum amount being £12,000. This means for every £200 you contribute the government will add an extra £50 to the account. Therefore, if you reach the maximum of £12,000, they will add an extra £3,000 to your account. The Help to Buy ISA is available for each first-time buyer so if you’re purchasing a property with a partner then you’ll have an extra £6,000 towards a deposit. Many high street banks such as Barclays and HSBC have accounts designed specifically for the scheme. Interest rates perks on these accounts do different between banks, so it’s worth investigating which is the best for you.
Who qualifies for the Help to Buy Scheme?
You qualify if:
- You’re a first-time buyer
- You’re aged over 16 years old
- Wanting to buy a house worth up to £250,000 in the UK or up to £450,000 in London
You don’t qualify if:
- You’re going to rent out the property
- You’re going to purchase a property outside of the UK
- You already have another Help to Buy ISA account
- You have already opened a Cash ISA in the same year
How soon can you get the money?
Once you have saved up £1,600 you’re able to claim your government bonus whenever you require it. If, however you want to receive the maximum amount of money from the government, £3,000, you’ll have to save £12,000. This is said to take approximately 4 and a half years when saving at a rate of £200 a month. It’s important to note that when you’re claiming your bonus that you make your solicitor or conveyancer aware of this before completion. This may cost up to £50 plus VAT.
How to open a Help to Buy ISA
To open a Help to Buy ISA is as easy as opening any other form of bank account. All it takes is a simple phone call to a bank or completing their online process if you’re already with the selected bank. If you prefer another bank for this specific account, then you’ll have to go to make an appointment with the selected bank. This ensures your details are taken correctly enabling you to open business with the bank chosen. Initially, you can deposit £1,200 when opening the account but are then limited to depositing a maximum of £200 per month thereafter. Interest rates differ between banks and only affect the money deposited by the account holder and not the government bonus.
Why is the help to buy ISA ending?
“The Help to Buy ISA has helped around 200,000 people on to the property ladder. Around one million other people still have an account,”. According to Helen Saxon, banking editor of MoneySavingExpert.com.
However, despite these figures looking good for the scheme, the rising costs of housing are showing that this bonus from the government. It’s only a small portion of what’s needed to be saved in order to afford a home. It also shows the guidelines put in place limit peoples savings too much that they struggle to afford to put a deposit down.
To help solve this problem in 2017 the government implemented a new scheme the Lifetime ISA, LISA. A Lifetime ISA allows holders to save up to £4,000 with the ability to deposit large sums into the account. With the ability to save more you’re also rewarded a bigger bonus totalling a maximum of £32,000. Although you can save at a quicker rate you’re penalised when using the money for purposes other than buying your first house.
What happens when they’re gone?
The last day available to apply for the Help to Buy Scheme is November the 30th. After this date people looking to open ISA’s for their first home will have to apply for a Lifetime ISA. People holding Help to Buy ISA’s will still be able to retain their accounts and carry on saving using this. Another way for people to get onto the property ladder is the 100% mortgage. This scheme allows people to use a guarantor to pay for their mortgage deposit and pay them back over time. Although the Help to Buy scheme is ending soon there’s still plenty of ways to save up for your first house. You shouldn’t be disheartened to start saving straight away.