The government’s latest bid to boost UK home ownership and get more people on the housing ladder is officially launched on 1st December.
Details of the new ‘Help to Buy ISA’ initiative which rewards people saving for a first home with a 25% bonus have been patchy and there’s been some confusion about how the scheme works, so here are a few pointers to clarify some of the more common misconceptions.
I can’t take out a HTB ISA if I’ve already taken out a Cash ISA in the 2015/16 tax year
This is not necessarily the case as at least one provider; Nationwide Building Society, will allow you to have both a Cash ISA and HTB ISA within the same ISA wrapper as long as your total savings don’t exceed the annual tax free savings limit of £15,240.
I’ve only got 3-6 months until I purchase my first home so it’s not worth taking out a HTB ISA
Even if you’ve only got three months this gives you time to put in the initial £1000 maximum lump sum and three £200 monthly payments – so you’ll have a £1600 balance which entitles you to a £400 bonus contribution from the government. If there are two of you buying for the first time and you save £1600 each then your bonus will be £800 – that’s got to be worth it!
I’m not sure when the HTB ISA bonus get paid into my account
The bonus won’t appear in your account, instead when the time comes to purchase your first home, the conveyancing solicitor acting on your behalf will claim the bonus directly from the government and use it as part payment towards the purchase price of your home.
I have to start my HTB ISA on 1st December 2015
You can open your account any time within four years of 1st December 2015 – the maximum term you can save for is four years and you must claim your bonus by 2030.
Saving £200 per month (or £400 per month for joint buyers) will take too long to build the deposit required.
This is the situation that some savers will face, particularly in London and the South East where prices (and required deposits) are much higher than the national average. However the bonus structure is far more rewarding than any interest bearing savings account, so it’s worth saving the maximum in an HTB ISA while simultaneously saving the remainder in a separate savings account.
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