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Could a Help to Buy ISA help you reach your goal?

Could a Help to Buy ISA help you reach your goal?

Category: ISAs

Updated: 15/03/2016
First Published: 15/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Help to Buy ISA officially launched in December, which means you can now get a Government contribution towards the deposit on your first house purchase. However, it still isn't always that simple, and the home ownership dream can seem just that for many of us – a dream. So how can you give yourself the best possible chance of reaching your goals?

Get your finances in order

One of the most important things you can do is be prepared. New mortgage affordability rules, whereby mortgage lenders ask for current financial information as well as thoroughly assessing your finances to gauge if you'll be able to pay in the future, have made the home-buying process more complicated, which is why it's vital to be ahead of the game.

Heading to a credit check provider, such as Experian CreditExpert, can give you the head start you need. You'll be able to take a close look at your personal credit history, including any mortgages, credit cards, mobile phone contracts or any other credit agreements you've had in the past, and can see how likely you are to be accepted in the future.

Your credit score contains information that helps lenders both confirm your identity and assess whether you're a reliable borrower, which means they'll be using it as the basis of your application – so it makes sense to get a head start.

It's likely that the better deals are going to be available for those with the best credit reports, and without a decent credit history, you may be denied credit altogether. So, while you're saving for your mortgage deposit, it makes perfect sense to get your credit report in order, such as by keeping up-to-date with repayments, paying down some debt if necessary, and not applying for more credit if you can help it.

You can find some more tips by reading our guide, and when it's time to take a closer look at your credit score, see if you can take advantage of Experian Credit Expert 30-day free trial (a monthly fee of £14.99 applies thereafter, but you're not tied in and can cancel at any time during your trial period without being charged).

Make the most of the Help to Buy ISA

Once you've got that aspect of your finances in order, it's time to look into saving for your deposit – and this is where the Help to Buy ISA can come in. The scheme is designed to help first-time buyers get onto the housing ladder with as little as a 5% deposit, and depending on your circumstances and the property you're trying to buy, you could go on from that to apply for a Help to Buy mortgage.

But first, let's take a look at how the Help to Buy ISA works to see if you could get involved:

  • If you're a first-time buyer and save up to £200 a month with a Help to Buy ISA, the Government will boost your savings by 25% – which equates to a £50 bonus for every £200 you save!
  • The maximum bonus you can receive is £3,000. So if you save £12,000, the Government will boost your total savings to £15,000.
  • New accounts will be available for four years, but once you've opened an account there's no limit on how you long you can save for.
  • There's no minimum monthly deposit requirement, but there is a maximum: you're only allowed to save up to £200 a month, but you can make an initial deposit of £1,200 when you open the account.
  • Accounts are limited to one per person rather than one per home, so if you're buying with someone else, you can both receive a bonus.
  • The Help to Buy ISA is only available to individuals who are aged 16 and over, and the bonus is only available to first-time buyers purchasing UK properties.
  • The bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London, and will be paid when you buy your first home.

As you can see, it's a simple solution that could be a great way to help fund your first home – you're essentially getting free money, and all you have to do is carefully squirrel money away, which is what you were undoubtedly planning to do anyway.

Getting the best mortgage

All that's left to do is find the right mortgage! There are some great deals around at the moment thanks to mortgage rates being at record low levels, so now's a great time to get in on the action.

However, remember to stay on top of your credit management responsibilities. You may be saving for your home but you'll still need to keep up with any credit repayments you have, as potential lenders will look at your report to see how responsible you are. The best mortgage deals will always be available to those who have the best credit reports, so don't be slack!

What next?

Check out the top Help to Buy ISAs

Compare mortgage rates

Check your credit report

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.