There are various initiatives, detailed below, which form the government’s “Help to Buy” scheme. The aim of which is to aid people with the build-up of deposit in order to buy a new home.
Help to Buy ISA
The Help to Buy Individual Savings Account(ISA) scheme involves receiving a government bonus on top of your own savings. This account is offered from a variety of banks and building societies across the UK to first time buyers on their first home
A starting deposit of anywhere up to £1,200 can be made followed by a maximum monthly amount of £200. The government will add a 25% contribution on top of this. However, you must save a minimum of £1,600 before you are eligible to claim the bonus. The maximum amount the government can grant you is £3,000 which would mean saving £12,000 in total yourself first.
The bonus will have to be applied for via your solicitor/conveyancer nearer the time of completion of the property purchase.
If you have paid into a cash ISA this tax year, in order to open a Help to Buy: ISA, you will have to transfer your active cash ISA to a Help to Buy: ISA. You can transfer up to £1,200 of your active cash ISA balance into your Help to Buy: ISA.
Anything more than this should be moved into either a stocks and shares ISA, an Innovative Finance ISA, or a non-ISA account. However, the total amount saved must not exceed the annual subscription limit for ISAs.
Alternatively, some ISA managers offer portfolio ISAs which allow you to hold multiple ISA products within a cash ISA wrapper. You can still only subscribe to one cash ISA but it can be made up of one or more cash ISA products, including a Help to Buy: ISA. The standard cash ISA and Help to Buy: ISA allowance limits will still apply.
In order to qualify for the Help to Buy ISA Scheme you must:
- be a UK resident and over 16 years old
- intend to live in the property you are purchasing
- buy a property worth up to £250,000 (£450,000 in London)
- purchase the property with a mortgage
- Have a valid national insurance number
Further details can be found via the government’s website at www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/
Help to Buy (Wales) Scheme
This scheme is applicable to anybody purchasing a new-build property in Wales worth up to £300,000.
Under this scheme, the Welsh government will lend up to 20% of the value of the property – which would mean a deposit of 5% from yourself, and a mortgage for the remaining 75% of the price.
An administration fee of £1 per month is charged for the first five years, after which a 1.75% interest rate applies, increasing each year based on the Retail Price Index (RPI) plus 1%. This scheme is set to continue until March 2025, with properties purchased needing to meet a minimum EPC rating of B?.
Further details can be found via the government’s website at www.helptobuywales.co.uk
Mortgage Wise do not advise on any type of ISA.
ISA’s investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers. Tax treatment varies according to individual circumstances and is subject to change.
You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.
By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.
Your home may be repossessed if you do not keep up repayments on your mortgage.