If you’ve just started saving for a house, you might be wondering how and why the Government helps first time buyers.
Here’s how Help to Buy ISAs work and how they can help you with your deposit.
What is a Help to Buy ISA?
Help to Buy ISAs were introduced in 2015 to help first time buyers onto the property ladder. However, the government scheme ends on November 30th 2019 (so hurry up!).
For every bit of money you put into a Help to Buy ISA, the government will add another 25% to the account. This is specifically designed to go towards your first mortgage.
This is how they work:
You set up the ISA and put cash into it every month. The 25% government contribution doesn’t kick in until you save £1,600, giving you £400 extra at the most basic level.
In the first month you can deposit £1,200 into the account. This will kick-start your ISA schedule. After that, the limit is £200 every 28 days, or £2,400 a year.
You can use a Help to Buy ISA for any mortgage, not just a Help to Buy mortgage deal.
The maximum the Government will give you is £3,000. That means you have a total of £15,000, with £12,000 of your own cash. You can still put more into the ISA but there won’t be any further incentives.
Some points of clarity
You’ll have to inform a solicitor “when you are close to buying your first home”. The funds will then be released once the property transaction has completed.
You also can’t use the money to pay towards the fees of the solicitor or estate agent – or, in fact, any costs associated with buying a house which the Government deem ‘indirect’. Instead, the Help to Buy ISA is meant to pay for your mortgage and your mortgage only.
Here are some more things to note:
- You can’t use the Help to Buy ISA for a home worth more than £250,000, or £450,000 in London.
- The property must be based in the UK.
- Interest rates vary from lender to lender It may be a government scheme, but banks remain in charge of the savings account.
- Whether you take advantage of a Help to Buy ISA or not, we can help you get the right mortgage for you so that you can get onto the property ladder. It only takes a few minutes and our expert advice is completely free.
Click here to get started.