So what is the “Help to Buy” ISA scheme?
You may have already come across the “Help to Buy” home ownership scheme brought in by the Government in 2013. This scheme was introduced to help people become home owners, by providing funding to mortgage lenders to support high loan to value mortgages.
Despite this, many first time buyers are still struggling to save up a large enough deposit to get a foot onto the property ladder. Couple this with the low returns currently available on cash deposits and being a first time buyer in today’s climate is not getting any easier.
This is one of the reasons that the Government cites for launching the “Help to Buy” ISA.
In simple terms it’s an ISA. That means it grows tax free for as long as it remains within the ISA wrapper.
In terms of contribution levels, there is a maximum monthly saving of £200 per month and the option to pay in a lump sum of £1,000 when you first open the account. When you eventually use your ISA to put a deposit on your first home, the government tops up whatever you have managed to save by 25%. This is subject to a maximum Government contribution of £3,000 for a £12,000 pot.
Accounts are per person rather than per home, so a couple both buying for the first time jointly, with a combined deposit of £24,000, could benefit from a £6,000 subsidy.
Clearly the offer is limited to first time buyers and there is also a property restriction of £450,000 in London and £250,000 elsewhere in the UK. The minimum age for a Help to Buy ISA is 16 years of age.
The Help to Buy ISA counts against your Cash ISA allowance, so you won’t be able to open a Help to Buy ISA as well as a Cash Isa in the same year.
The scheme is due to launch in Autumn 2015, so keep an eye out on the high street…