Whether you're debating buying a home in the next few years, or are thinking of continuing to rent for a while, here's why you need to open a Help to Buy ISA now – before it's too late!
Though it may seem like a bit of a bore, saving up for a house is one of the biggest concerns for Millennials now, and with house prices continuing to rise, albeit slowly, it's probably something you should start thinking about sooner rather than later.
Why do I need to open a Help to Buy ISA now?
The deadline for opening a Help to Buy ISA is midnight, 30th November 2019.
If you open a Help to Buy ISA before this deadline, or if you have already opened one, you will be able to save and receive the Government bonus until November 2029.
What is a Help to Buy ISA?
A Help to Buy ISA is a tax-free savings account for first-time buyers, which boosts your savings with a government contribution of up to £3,000.
So it's a great way of topping up your mortgage deposit!
Who can open a Help to Buy ISA?
To qualify for a Help to Buy ISA, you must:
- be 16 or over
- have a valid National Insurance number
- be a UK resident
- be a first-time buyer, and not own a property anywhere in the world
- not have another active cash ISA in the same tax year: If you have opened a cash ISA this tax year, you can open a Help to Buy: ISA but will have to take additional steps.
Then to receive your Government bonus, the property you're buying must:
- be in the UK
- have a purchase price of up to £250,000 (or up to £450,000 in London)
- be the only home you will own
- be where you intend on living
- be purchased with a mortgage
How does a Help to Buy ISA work?
1. Open your account
If you are eligible, you can open a Help to Buy ISA through a variety of banks and building societies.
This ISA is available to all qualifying first-time buyers as well. So if you're planning to buy a home with a partner, you can both open a Help to Buy ISA and both receive the Government contribution.
2. Deposit some money
To open your Help to Buy ISA, you need to deposit some money to get it started. This can be as little as just £1, up to a maximum of £1,200.
3. Save each month
Every month you can then deposit up to £200 in the account. The Government will then give you a 25% bonus on your savings, up to a maximum of £3,000. So you'll get £50 for every £200 you save.
Meaning, if you save £12,000, you will actually have £15,000 to spend on buying a home.
Or, if your partner has a Help to Buy ISA as well, and saves £12,000, you will have a total of £30,000 to put towards your mortgage.
If you didn't use the Help to Buy ISA, you'd have £24,000 to spend.
4. Receive your 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.
If you want to see how much you could save with the Help to Buy ISA, check out the Government's ISA calculator here: www.helptobuy.gov.uk