THE HISA: HOW THE HELP TO BUY ISA COULD HELP WITH YOUR DEPOSIT
How will the Help to Buy Isa work?
A Help to Buy Isa is a tax-free savings account that can be used by first-time buyers to fund a deposit on a property.
You
can save up to £200 each month and the government will provide a 25 per
cent bonus on each amount saved and the interest earned.
So
for every £200 you contributed, you can get £50 from the government.
You will also be able to set up the account with a £1,000 deposit on top
of the £200 contribution, meaning you could start off with £1,250 when
you include the government money.
This
isn’t an endless pot though and the maximum government contribution you
can get is £3,000. This means you will only get the government bonus on
up to £12,000 worth of Help to Buy Isa savings. That will give you
£15,000 towards a deposit.
Saving £200 each month to get £12,000 would take five years.
If
you put the initial £1,000 deposit that is allowed in, it would take 55
months to save the remainder to get to the £12,000 maximum - four years
and seven months.
So far it is unclear whether providers will let you save more on top of the £12,000.
Can I have a Help to Buy Isa alongside my Cash Isa?
You can’t save into a cash Isa and a Help to Buy Isa in the same tax year.
If
you have already opened a cash Isa since April 2015 you will need to
close this and transfer the balance, if allowed by the provider.
You
can open a new cash Isa every year, but with the Help to Buy Isa you
are only allowed to open one Help to Buy Isa that you then hold onto and
contribute to each tax year.
Help
to Buy Isas are available to individuals, rather than households, so if
you are buying with another first-time buyer you could combine your
savings. This means a couple could save up to £30,000 with the
government bonus.
You
can still put money into a stocks and shares Isa. So if you put in
£2,400 a year of your Isa allowance into the Help to Buy product, you
still have £12,840 you could invest, based on the current allowance.
How long can I have a Help to Buy Isa for?
You
can keep your Help to Buy Isa open and contribute for as long as you
like from December 1 2015. But the scheme will be closed to new savers
on November 30 2019.
You can take your money out at any time, but you only get the bonus when you are putting a deposit down for a house.
What happens when I am ready to use my deposit?
You will only get the government contribution once you close your account.
Once you have saved up the amount required for your deposit you would need to close you Help to Buy Isa account.
Your solicitor or conveyancer will then apply for the government to pay the bonus amount.
They can only charge a maximum of £50 plus VAT to process your bonus payment.
You will need a minimum of £1,600 to get the government bonus, which would pay you £400.
The
government bonus will be calculated based on the amount of money you
have in your account when you close it. This includes both the money you
have saved, and any interest you have earned on that money. You will
not receive a government bonus of more than £3,000.
The
money raised can only be used for a first-time buyer residential
property worth up to £450,000 in London or up to £250,000 elsewhere.
Who offers Help to Buy Isas?
Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander, and Virgin Money have all signed up offer Help to Buy Isas.
There
is no requirement to take out a mortgage with the lender who provides
your Help to Buy Isa, so it is worth shopping around for both the best
Help to Buy Isa rate and mortgage deal.
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