If you are a first time buyer and you are saving to purchase your first property you may have opened a Help to Buy ISA. The Help to Buy ISA is not to be confused with a Help to Buy Equity Loan, the latter is where the Government lends you up to 20% of the cost of a new build home, so you only need a 5% cash deposit and a mortgage for the remaining 75%. A Help to Buy ISA allows you to open an account with up to £1,200 and save a maximum of £200 per month, you then receive a Government bonus of 25% of the amount you have saved. The maximum bonus you can receive is £3,000; however you need to save at least £1,600 before you can claim the minimum Government bonus of £400. When you are at the stage of purchasing your first property and you are close to completion, you will need to close your ISA and your solicitor will apply for your Government bonus.
The Help to Buy ISA’s are available until 30th November 2019 for new savers, after this date you will not be able to open this ISA. However if you have opened an account before this date you can continue to save into the ISA after the closure. although you must claim your Government bonus before 1st December 2030. So if you have not opened a Help to Buy ISA and are planning on purchasing your first property, now is the time to do so.
There is an alternative to the Help to Buy ISA; this is known as the Lifetime ISA (LISA). There are various differences between the LISA to the Help to Buy ISA; including that you must have the LISA open for a minimum of 12 months before you can use it to buy your first home. However you can open this with just £1 if you want to get the clock ticking. The maximum you can save into the LISA is £4,000 per year. The LISA can also be used as a saving for retirement, if you are not purchasing your first home you can withdraw the money from your LISA after the age of 60 and you will receive the Government bonus. You should be aware that if you withdraw the money before age 60 and do not use it to purchase your first home, you do not get the bonus and you would also have to pay a penalty.
If you are looking to purchase your first home you should contact an Independent Financial Adviser to help guide you through the process.
Jenny Croskery Cert CII (MP)
4th March 2019