The Government has recently introduced a new scheme that will help first-time buyers get a step on the property ladder. The new Help to Buy ISA will be launched in autumn 2015 (exact dates to be confirmed) and offers savers a cash boost towards the cost of buying their first home.
If you or someone you know are considering saving into a Help to Buy ISA, here’s what you need to know:
How does the Help to Buy ISA work?
Save up to £200 per month and the Government will add a 25% bonus. It will also be possible to start the ISA off with an initial deposit up to £1,000, on top of which the Government will contribute 25% (£250 in this instance).
The scheme is open to first-time buyers and account holders must be over the age of 16. There is no income criteria so anyone can open a Help to Buy ISA providing they have never owned a house before.
Is there a minimum saving limit?
The minimum you need to save into the ISA is £1,600. The maximum contribution that the Government will make is £3,000 (on a £12,000 balance).
How can I open a Help to Buy ISA?
The new ISA will be made available through high-street banks and building societies, which will each set their own rates, as they do with normal cash ISAs. This means that you can also earn interest on your savings, as well as receiving the Government bonus.
You can only open one Help to Buy ISA, unlike a cash ISA which allows you to open one each tax year. You will, however, be allowed to continue saving into the ISA each tax year. You will also be permitted to transfer an existing Help to Buy ISA to a new provider, for example if interest rates drop with your current provider.
As the ‘one account’ rule applies per person, if you are a couple you could both open a Help to Buy ISA as individuals.
It’s important to note, you cannot save into a cash ISA and a Help to Buy ISA in the same tax year. So, if you’re thinking of opening a Help to Buy ISA when they are launched in the autumn, you would not be able to open a new cash ISA or deposit cash into an existing ISA after 6th April 2015.
When and how will I receive the bonus?
You will receive the bonus, in the form of a voucher that is sent directly to your mortgage lender, when you purchase your first home.
You will be able to use the voucher towards any residential mortgage deal, it does not necessarily have to be a Help to Buy mortgage.
Opening a Help to Buy ISA for your children
The minimum age for a Help to Buy ISA is 16 so you cannot open one for children under this age. If your child is over 16, you can encourage them to open one which you are then free to deposit cash into.
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