Government help for first time buyers

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Help to Buy ISAs confirmed, encouraging first time buyers to get their foot on the property ladder
New house wrapped in ribbon with a bow

From 1st December 2015, banks and building societies including Virgin Money, Barclays, and Nationwide will begin offering Help to Buy ISAs. The scheme will help those saving up for a deposit on their first property by rewarding regular deposits with bonuses paid by the UK Government that will go towards the final purchase price.

As the ISAs are not limited to one per property, those buying together can save separately and each receive bonuses towards their new home. Each person can make an initial deposit of up to £1,200 in the first month and then up to £200 per month thereafter. The additional £1,000 deposit has been included to account for the five months that have passed since the scheme was announced in the July Budget.

The accounts are effectively cash ISAs and will pay standard savings interest rates, in addition to the final bonus awarded when you come to purchasing a property. As long as you have saved a minimum £1,600 in the ISA, you will receive a bonus of 25% of the value of your savings – up to a maximum bonus of £3,000 (savings of £12,000 required).

The process for first time buyers is relatively straightforward;

  1. You save money in a Help to Buy ISA
  2. You close the account when you are ready to purchase your first home, but do not withdraw any money
  3. You receive a closing letter from the ISA manager
  4. You give the closing letter to your solicitor
  5. Your solicitor uses the letter to apply online for the UK Government bonus
  6. The bonus is transferred to your solicitor
  7. Your solicitor completes the purchase using the full bonus amount

There are conditions to be aware of besides the minimum and maximum deposit amount for the bonus: transfers in from normal ISAs above the prescribed limits are not accepted and the ISA contribution rule limiting you to one cash and one investment ISA applies. This might mean you have to wait until after 6th April before opening a Help to Buy ISA if you have opened, or contributed to, a cash ISA this tax year. What is more, the value of your property must be less that £250,000 – or £450,000 if you are buying in London.

Help to Buy accounts are only available for the next four years, until December 2019, but once you have opened an account there is no limit to how long you can save for. It is important to note that although you will receive the standard interest rate on your deposits, you will only receive a closing bonus on the first £12,000 of savings.

Information from the UK Government on Help to Buy ISAs can be found here. If this is of interest to you or someone you know and you would like to find out more, please contact us.

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