Almost everyone seems to be in agreement, getting on the housing ladder if you’re a first time buyer is harder than ever.
A combination of rising house prices and stricter mortgage lending criteria is making life extremely tough for many first time buyers, even after the launch of various Government incentives, such as Help to Buy.
So the news in last week’s Budget that a new Help to Buy ISA (Individual Savings Account) will be launched later in the year is a boost to many would-be first time buyers.
But how does it work? Who qualifies? Who benefits? Read on as we reveal all the answers.
How does it work?
Much the same as a traditional Cash ISA with a few significant differences.
The money you pay in to the Help to Buy ISA will get interest added to it, which is tax-free.
However, the biggest difference between a Help to Buy ISA and normal Cash ISA is that for every £1 you save, the Government will add 25p; helping you build up enough money to put down as a deposit on your first house more quickly.
How much can I pay in?
You can start saving with a one off lump sum of £1,000, to which the Government will add £250 and then save up to £200 per month.
The maximum you can save into a Help to Buy ISA is £12,000, which be boosted to £15,000 by the Government’s contribution. The Government contribution however will not be added until the first time buyer proceeds with their purchase.
Are there any other restrictions?
Yes.
Only houses worth up to £250,000 (£450,000 in London) can be bought with the proceeds of a Help to Buy ISA and it cannot be used by people wishing to purchase a Buy to Let property.
It’s also worth noting that you cannot contribute to a Help to Buy ISA and Cash ISA in the same tax-year.
When will the Help to Buy ISA be available?
The details are being worked out and it is anticipated that the Help to Buy ISA will be available from the autumn.
But what if we get a change of Government?
May’s election could well mean we get a different Government and Chancellor.
Ed Balls, Labour’s Shadow Chancellor, has already said that he has no plans to abolish Help to Buy ISAs before they are even launched.
The Government has proposed that they will be available for four years, however once one is opened it can be held indefinitely with no time limit on when it has to be used by.
Can couples have a Help to Buy ISA each?
Yes.
This means that two first time buyers purchasing a home together (they don’t necessarily have to be a couple of married) can save a maximum of £30,000 between them using the Help to Buy ISA.
How old do you have to be?
The Help to Buy ISAs will be available to anyone aged 16 or over.
Can I take a Help to Buy ISA out for my children?
No you can’t, however you could give money to them each month which they could then save into the Help to Buy ISA.
When will more information be available?
With the election just around the corner that’s hard to answer, however the Help to Buy ISAs are expected to be launched in the autumn.
Although we could still see a number of changes made over the next few months.
We will keep you up to date and publish more information when it is available.
In the meantime if you have any questions or queries please do not hesitate to call us on 0115 933 8433 or email info@investmentsense.co.uk
Please note: The Financial Conduct Authority does not regulate Cash ISAs
