The Help To Buy ISA Explained

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by Danni Deibe |
Published on

Are you saving to buy your first home? From £1-£75,000 your money is protected for free by the FSCS in UK banks, building societies and credit unions. Find out more here

For my generation, those of us in our mid-late twenties, the notion of buying a home, no matter how good our jobs and qualifications are, seems like a pipe dream. That is to say, it did until now. You’ve probably heard a lot about the Government’s new schemes and ideas that aim to help people like us get onto the property ladder, in particular the ‘Help To Buy ISA’. You probably know that it promises to give first time buyers up to £3,000, but if you’re anything like me (ambling through your twenty-something life living pay day to pay day, chucking a sum of money in the general direction of a savings account every so often, with no real strategy or financial knowledge) then you probably don’t know much beyond that. Financial jargon can be baffling and off-putting, so I’ve broken it down for myself, to work out just what it is, how I get one, and what the point is and I’m sharing the wealth with you.

What Is It?

The Help To Buy ISA has been created by the Government to help ‘hard working people’ take their first steps to owning a home of their own. Basically, it pays you a bonus of up to £3,000 for saving to buy a home, at a rate of £50 for every £200 you put into your ISA. Essentially, it can boost your savings from £12,000 to £15,000.

Am I Eligible?

It’s pretty easy to be eligible for the scheme. You just have to be over 16 and a UK resident with a valid National Insurance number. Obviously you can’t own any other property (anywhere in the world), and you can’t have owned any in the past. The only tricky condition is that you can’t have an active Cash ISA in the same tax year you want to open your Help To Buy ISA. However it’s not the be-all-and-end-all. If you already have a Cash ISA, there are steps you can take, and you can find out more here.

How Do I Get One?

Selected banks and building societies (including most of the big names and some of the smaller ones) now offer the Help To Buy ISA and you can apply online in most places, over the phone, or you can go into your local branch. There’s a full list of all of the providers here.

How Can It Help With Me?

You might not think that £3,000 sounds like a lot of money, but when you look at the difference between a £12,000 deposit and a £15,000 deposit as 10% of the value of a house, that’s a huge difference in what you might be able to afford when it comes to getting a mortgage. The best bit is that if there are two of you, you can both open Help To Buy ISAs and both receive the bonus, so you could end up with £6,000 towards your first home. So whether you’re thinking of buying with your partner or your best friend, you’ll have even more buying power together.

What’s The Catch?

There isn’t one! It’s essentially free money and a great incentive to get saving. If there’s one thing to mention though, it’s that the claiming of the government grant at the end seems a little bit tricky and complicated. Instead of, as you might think, the money appearing in your ISA every £200 you put in, you wait until you’ve found the home you want to purchase and have hired a solicitor for all of the complicated legal stuff. Basically, you tell your ISA provider you’re ready to close the account, and they give the money directly to your solicitor, who transfers it to the seller, with anything else you’re paying. The only problem with this is that the solicitor will charge you an admin fee for this – BUT it’s capped at £50 + VAT, so it could be worse!

I Want To Find Out More, Where Can I Go?

The government have created a microsite full of info on this scheme, plus others like the Equity Loan scheme, and Shared Ownership. You can find it here.

Already got your deposit, or looking for more tips on buying your first place? Looking to increase the value of your home? Check out this video. And remember, whatever you're saving for, the FSCS protects your money in UK banks, building societies and credit unions.

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