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Next month on December 1st, the Help to Buy ISA will be launched which will allow ISA buyers to claim a bonus.
The Help to Buy ISA scheme was first announced by Chancellor George Osborne back in March this year, with the aim of providing people with a major tax break if they are saving for a deposit for a property. Many people including industry and economic experts have welcomed the new Help to Buy ISA, although many still believe that it isn’t a solution to the ongoing housing crisis.
Many banks and building societies are on-board with the scheme and are committed to offering Help to Buy ISAs. Their rates will be set by them and differ just as with normal cash ISAs, so you will earn interest like a normal cash ISA as well as getting the bonus at the end. Those offering the ISA include Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander and Virgin Money but as yet no rates have been set.
So how does it work? Here’s our quick guide to the Help to Buy ISA scheme:
- Pay money into a Help to Buy ISA account.
- Once you are ready to purchase a home, you can close your account and receive a closing letter from your ISA manager.
- This closing letter is passed to your conveyancing solicitor.
- The solicitor will then apply online for the government bonus.
- The solicitor receives the bones, and this is added to your existing funds to complete the purchase. It doesn’t need to be your sole deposit money; you can combine it with other savings for a deposit.
The bonus will only be available on homes worth up to £250,000, or £450,000 in London. Unlike some other government schemes, you’re not restricted to buying a new build, any property works and you can use it with any mortgage product available
How much will you receive?
The Help to Buy ISA scheme will give first-time buyers saving for a deposit the opportunity to put away £200 a month (you can save £1,200 in the first month) in a dedicated ISA that the government will top up by 25%, up to a maximum of £3,000.
As a first time buyer, you can also open an account with a one-off lump sum of up to £1,000. This is in addition to the monthly maximum.
If you are buying a home with a partner or friend, you can combine your personal bonus, which could add up to £6,000 towards a deposit for your first home. Help to Buy ISAs are for individuals, not couples, so you can open one even if your partner you’re buying a home with isn’t a first-time buyer. And if you’re buying with another first-time buyer, you can both have a Help to Buy ISA.
Although you’re only allowed to get one Help to Buy account, you can transfer it between different providers to chase the best interest rates.
Therefore it’s important to monitor the interest rate you’re getting and, if it drops, find a new Help to Buy ISA provider paying a better rate.
The government has realized that it’s still difficult for individuals and couples to get their foot on the housing ladder, and this scheme will help people to save for a deposit for a home much quicker. However, it doesn’t solve the problem of affordability especially in inflated areas such as London and Brighton. There are still many people on social housing waiting lists, in temporary accommodation or even homeless all as a result of the undersupply of affordable housing.
However, at least something is being done to help those who can afford to buy a home, save a little faster.