Starting from December 1st, the new help-to-buy ISA will become available. This scheme allows first time buyers saving for a deposit the opportunity to put away £200 a month into a dedicated ISA. The government will then top this up by 25% to a maximum of £3,000. You are also allowed to open the account with a maximum one-off sum of £1,000.
If you are buying as a couple you can both have an account, which could give a potential maximum boost of £6,000 towards a deposit for a first home. To qualify for the full bonus you need to have saved £12,000 but saving more will not increase this amount.
Also you need to save a minimum of £1,600 before you get any bonus which in this case is £400 taking your savings to £2,000. The help-to-buy ISA is only to be used for properties under £250,000 or £450,000 if the property is in London, and you don’t have to apply for a help-to-buy mortgage to qualify. Most large banks and buildings societies are understandably offering these schemes that I believe will not be offering high interest rates on the amount saved.
But if first-time buyers save the maximum for four and a half years they will have received the valuable £3,000 bonus. I believe these schemes are good for people who want to buy in the medium term, but have much less value for first-time buyers who want to buy in the next year or so.
Also it should be noted you can’t have a help to buy ISA in the same tax year as a cash ISA as you have to choose which one is most beneficial for you.
The government has now confirmed not just the bonuses that will be added to the loan but also the process for claiming it. This involves contacting your ISA provider when you are ready to buy and you will then receive a closing letter from the ISA managers. At this point the first-time buyer gives the letter to the solicitor who applies for the bonus. This is then added and the solicitor applies for the money and completes the purchase.
Overall, I believe the scheme nicely boosts first-time buyers savings but I do feel it will have limited appeal due to the restricted amount you can save each month.