Investing in a first home? Why not enjoy a £3000 top up from the government with a help-to-buy ISA.
The tides are turning for first time buyers. The property market, once the playground of large commercial investors, is vast becoming more and more accessible for the small time players. The shift comes in the wake of new fiscal changes set out by the government, who are eager to subdue the spiralling buy-to-let market and give prospective home-owners the opportunity to climb on to the property ladder. Within their agenda, incentives are in effect to give buyers a lifeline, allowing them to collect much needed capital for initial investment. The most prominent of these saving tools thus far, has been the help to buy ISA.
Introduced in 2013, the help-to-buy ISA has facilitated in thousands of first time buyers owning their very own home. The concept is simple. The initiative performs like a regular ISA, in that customers choose a lender, then make a deposit-up to £1,200 in this instance-to start their account. They may then save up to £200 every month. The government provides a top up of 25% once the account reaches £1,600 and they continue to subsidise savings at this rate until investment reaches £12,000. This gives potential home-owners the opportunity to earn between £400 and £3000 extra on their savings, on top of any interest they accrue naturally.
This capital is accessible at all times, but investors will only receive their 25% bonus, when using the money to purchase a first home up to the value of £250,000 (extended to £450,00 for properties in London). Funds can be used together with other savings and as the ISA’s are awarded on an individual basis- not ‘per property’-couples are able to combine their savings and effectively double their bonus. It is worth note that investors cannot open a help to buy ISA, if they have opened another cash ISA within the last 12 months, though some lenders do offer viable workarounds.
For those that are aware, the government will be introducing a new ISA as of April next year. The lifetime ISA as it’s called, also offers investors 25% on their savings but unlike the help-to-buy ISA, there is the potential to gain up to £32,000. So why not just wait for this new lifetime ISA? Well fortunately, the two ISA’s can be run in conjunction and as the government has raised the limit for combined savings in ISA’s, investors can now bank up to £20,000. Not only that, but those with an active help-to-buy ISA, will be able to transfer funds over to a new lifetime ISA when they are introduced and receive the increased bonus rate should they wish. Those who do run the two schemes in parallel will only be able to apply the bonus of one toward the purchase of a new home.
Looking to invest in your first home? Want to know what support is available? Taylor-Hall has you covered. Click the link here to put forward any queries you may have about the help to buy ISA, or contact us on (0191) 581 9018 for a free financial consultation.