Help to Buy ISA is a decent option if you’re a first-time buyer saving for a mortgage deposit. The state will add 25% on top of what you save, which could mean £1,000s of free cash. Plus, you can earn up to 2.6% interest tax-free. We take you through How ISA works.
The ISA is available at several banks and building societies, and they can be opened with anything from £1 to £1200 during your first month, and then up to £200 a month after that. You will need to have at least £1,600 saved in the account to receive the government bonus, but if you put in the maximum amount each month ten it would only take you three months to be able to claim a bonus. To be eligible for the scheme, you must be a UK resident and at least 16-years-old, as well as not own any property. The bonus is also only available on home’s worth a maximum of £250,000 outside of London, or £450,000 in London.
Help to Buy ISA, How does it work?
Open: the Help to Buy: ISA is available from a range of banks, building societies and credit unions.
The accounts are available to each first time buyer, not each household. This means that if you are planning to buy with your partner, for example, you could receive a government bonus of up to £6,000 towards your first home.
Save: save up to £200 a month into your Help to Buy: ISA. To kickstart your account, in your first month, you can deposit a lump sum of up to £1,200.
The minimum government bonus is £400, meaning that you need to have saved at least £1,600 into your Help to Buy: ISA before you can claim your bonus. The maximum government bonus you can receive is £3,000 – to receive that, you need to have saved £12,000.
Receive bonus: when you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus. Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.
Find out if you’re eligible for a Help to Buy: ISA here