Help to Buy ISA – what are you or your children doing with their Christmas cash gifts?
If you’re a first time buyer, or your children are, save up to £200 a month towards a first home with a Help to Buy ISA and the government will boost the savings by 25%.
‘Help to Buy ISA’ accounts have been available since 1st December. They will be on the market to open for 4 years, but once you have opened an account there’s no limit on how you long you can save for.
Make an initial deposit of £1,000 when you open the account – in addition to normal monthly savings.
There is no minimum monthly deposit – but you can save up to £200 a month.
Accounts are limited to one per person rather than one per home – so those buying together can both receive a bonus.
The bonus is available to first time buyers purchasing UK properties.
To claim the minimum bonus of £400 per person save £1,600.
Save £12,000 to benefit from the maximum bonus of £3,000 per person boosting your deposit savings to £15,000.
Each account is individual only available to those who are 16 and over.
Even if you take advantage of the initial £1,000 lump sum allowance, it would take four years and seven months of paying £200 a month before you could claim the full £3,000 bonus. So it could be a late 21st or early 22nd birthday present for your children! But of course it MUST be opened by them.
The bonus will be only be available on home purchases of up to £450,000 in London and up to £250,000 outside London and paid when your first home is purchased.
If you’re saving into a Help to Buy ISA you can’t save into another Cash ISA at the same time.
You don’t have to stick with the same product through the lifetime of the scheme and can transfer out to a different provider.
Providers are free to set their own interest rates so, as with any savings product, it’s a good idea to compare and shop around for the best option for you.
The initial wave of Help to Buy ISA interest rates announced by providers were competitive, although it’s important to remember that variable interest rates could change at any time.
Of course, the money you’ve saved is yours to do with as you wish, as is the interest, but if you withdraw it and spend it on something other than a home, you won’t get the bonus payment.
Finally, bear in mind that the bonus can only be used to buy a home – not for anything else.
How easy is it to claim the bonus?
This bonus will be paid at the point you’re ready to buy your first home – you’ll need to close your ISA account when you’re ready to purchase and you’ll receive a closing letter from the ISA provider.
You then give this closing letter to your solicitor, who in turn applies online for the government bonus.
The bonus is transferred to the solicitor, who then completes the purchase of your new home using the full bonus amount.
As there’s some admin involved in this process, make sure you make your solicitor aware well in advance that you plan to use your Help to Buy bonus, so this can be planned into the timescales for completing your purchase.
For any further information please contact Dawn Edwards.