A step on the property ladder

The Help to Buy ISA for a step on the property ladder

Everyone knows it’s never been more difficult to get a step on the property ladder. The new Help to Buy ISA which became available from Autumn 2015 is designed to help buyers save a deposit for their first home with 25% boost to savings courtesy of the government.

This may be of interest to you if you have adult children seething with resentment that they are still living with you or maybe you just want to help children or grandchildren, who are paying high rents when they could be building their own nest.

How does the Help to Buy ISA work?

For every £200 saved, the government adds £50 and the savings can be added to by the house buyer or their friends and family. This equates to 25% tax relief on savings up to £12,000. Saving the maximum £12,000 will see the government add £3,000 (which is the maximum government bonus) meaning the saver has £15,000 towards the purchase of their first home. The government contribution will only be added when the home is purchased. Introduced in autumn 2015, this scheme is likely to be available for four years.

How to access the Help to Buy ISA?

The Help to Buy ISA will be available from a range of banks and building societies.

The accounts are available to each first time buyer, not each household. This means that if the house buyer is planning to buy with their partner, for example, they could receive a government bonus of up to £6,000 towards their first home.

Getting started

Savers can save up to £200 a month into their Help to Buy: ISA. To kick-start the account, in your first month, a lump sum of up to £1,200 can be deposited.

The minimum government bonus is £400, meaning that at least £1,600 needs to be saved into the Help to Buy ISA before the bonus can be claimed.

Getting the bonus

When the first home is purchased, the solicitor or conveyancer will apply for the government bonus. Once received, it will be added to the Help to Buy ISA account.

Are you eligible?

To qualify for a Help to Buy ISA you must:

  • be 16 or over
  • have a valid National Insurance number
  • be a UK resident
  • be a first time buyer and not own a property anywhere in the world
  • not have another active cash ISA in the same tax year but if you have already opened a cash ISA there are some additional steps you can take to still benefit from the scheme.

To qualify for the government bonus, the property you are buying must:

  • be in the UK cost up to £250,000, or up to £450,000 if you are buying in London
  • not be a second home or a buy-to-let property
  • not be rented out after you buy it
  • be purchased with a mortgage

You can use the Help to Buy ISA with other government schemes, including the:

  • Mortgage Guarantee Scheme
  • Help to Buy: Equity Loan Scheme
  • Shared ownership Scheme

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