There are not many things in the world of finance that can be described as a "no-brainer". However, if you are a first time buyer saving for a property, then the new Help to Buy ISA which launches today is an absolute must.
Like all ISAs, the scheme is a tax-free savings plan. The difference is that the government will top up your monthly savings by 25%.
The maximum amount that can be saved each month is £200. However, the account can be opened with an initial £1000 lump sum payment making a first month limit of £1,200.
The maximum top-up payable is £3,000 – in other words you save £12,000, the government adds a top-up of £3,000.
The scheme is launched today and every first time buyer from the age of 16 can now open one. A first time buyer is classed as someone who does not own and has never owned an interest in a residential property either inside or outside the UK.
As with all ISAs, it’s an individual product so a couple could have one each, assuming both are genuine first time buyers. Both savers would receive the government top up.
- You need to save a minimum of £1,600 in order to get any contribution from the government.
- If you are currently contributing to a cash ISA you cannot start a Help to Buy ISA in the same tax year. Therefore you will need to wait until 6 April 2016 before you can open one.
- If you miss a payment, you cannot play catch up later so I would advise if you have the cash, save the maximum £200 contribution every month. Each £200 will mean a £50 cash top up from the government.
- You can use it with any mortgage i.e. it doesn’t have to be in conjunction with the government Help to Buy scheme. The only stipulation is that it must be a residential mortgage and this includes shared ownership purchases.
- The top-up will be paid via a solicitor when you complete the purchase of your house. Therefore, whilst this is a fantastic product for helping to save for a first house purchase, it is not suitable if you plan to spend the money on other things.
Providers are now announcing their rates with Halifax the highest I’ve seen advertised so far at 4%. More lenders will publicise their rates in the next few days.
If you’d like more advice on saving for your house purchase, contact LIFT-Financial on 0161 929 2626 or email me firstname.lastname@example.org