It's been a long time coming, but the Help to Buy ISA – first announced in this year's Budget – will be with us next week! But just what is it, and how can you get involved? Here's a quick overview to give you a better understanding of what's going on.
The Help to Buy ISA is a scheme designed to boost the amount you're able to save to put towards a deposit for your first home, with that extra boost being provided by the Government: if you save money into a dedicated Help to Buy ISA, the Government will top it up by 25%. Essentially, this means that for every £200 you save, you'll receive a Government bonus of £50, up to a maximum bonus of £3,000.
You can save up to £200 per month in the ISA, and to kick-start the account, you're allowed to make an initial lump sum deposit of £1,200. You'll need to have saved at least £1,600 in the account in order to receive the bonus, however, as the minimum that can be applied for is £400, and to benefit from the full £3,000 bonus you'll need to save £12,000 of your own money – which, based on the current monthly deposit allowance, would take just over four years to achieve.
However, as an added boost, the accounts are available to individual first-time buyers and not individual households, which means that both you and your partner could open a Help to Buy ISA and eventually receive a joint bonus of up to £6,000, which could go a long way to boosting your deposit. It's also worth remembering that the bonus won't be applied until you physically buy your first home (so you can't use the Government bonus for a sneaky holiday!). When the time comes, your solicitor or conveyancer will apply for the bonus, which will be added to the money you're putting towards your first home.
Generally speaking, most first-time buyers here in the UK will qualify to take part in the scheme, but just for the removal of doubt, here are a couple of checklists. To qualify for a Help to Buy ISA, you must:
Furthermore, to qualify for the Government bonus, the property you're buying must:
You can use the Help to Buy ISA together with other Help to Buy schemes, including the equity loan and mortgage guarantee elements, so it's perfectly possible to save for your home with Government support and go on from that to buy your property with the same kind of help.
If you haven't opened a new cash ISA, or put any money into an existing cash ISA since 5 April 2015, you can open a Help to Buy ISA without restriction. However, if you've already saved into a cash ISA in the current tax year and now want to open a Help to Buy ISA, you'll have to transfer your active cash ISA to the Help to Buy version.
You may not be able to go the whole hog, however: you can transfer up to £1,200 of your active cash ISA balance into your Help to Buy ISA, but anything above this amount should be moved into either a stocks & shares ISA (you're allowed a stocks & shares ISA and a Help to Buy ISA in the same tax year, subject to current tax guidelines and allowances) or a non-ISA savings account.
Alternatively, portfolio ISAs allow you to hold multiple ISA products within a cash ISA wrapper, but this is where it gets a bit complicated. You can still only have one active cash ISA (and one allowance) but it can be made up of one or more standard cash ISA products, including a Help to Buy ISA.
Under a portfolio arrangement you can save into a cash ISA and a Help to Buy ISA at the same time, subject to standard cash ISA and Help to Buy ISA allowance limits. So far Nationwide has announced that it'll offer this as an option, but it's worth speaking to them or your individual savings provider to get a better understanding of what it entails.
The scheme officially launches on 1 December, which means you've now got less than a week to wait before you can get started! Of course, you may need to wait for your preferred provider to reveal its applicable Help to Buy ISA product, so in that sense, the date you can get started is all down to the providers.
Barclays, Nationwide, Lloyds Banking Group, NatWest, Santander, Virgin Money and Aldermore have all signed up to offer Help to Buy ISAs, but as yet there aren't many details about what the exact offerings will be, so we can't give a definitive product guide or comment on the potential rates that will be available.
Nonetheless, it's hoped that we'll get a better understanding of the new savings landscape when the Help to Buy ISA officially launches next week. In the meantime you can find out more by reading the official FAQs, but after that, watch this space!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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