Help To Buy ISA

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hand-427518_640 One of the basic rules of thumb of property buying is that you want to be able to put down as big a deposit as you possibly can. One reason for this is that bigger deposits are looked on very favourably by mortgage lenders and can help you to get a better mortgage deal. In fact in the light of the Mortgage Market Review, the size of your deposit might make a difference to whether or not you get a mortgage at all. Help to Buy ISAs were created specifically to help first-time buyers put together that all-important deposit.
What is a Help-to-Buy ISA?
The term ISA stands for Individual Savings Allowance. It was originally created to describe a general savings and investment product, which was (and is) available to all adults resident in the UK. The defining feature of a Help-to-Buy ISA is that the government will top up each £200 the saver deposits with £50 additional credit, up to a maximum of £6000. To get the £6000 you would need to save £12,000, giving you a deposit of £18000. That is per person, so if two (or more) people were to buy together, they could pool their allowances. It’s important to understand that you can make a total contribution of £3400 in the first year after opening an ISA and then up to £2400 each year after that until you reach the cap of £12000. This means that you would need a minimum of about four and a half years of saving to receive the full £6000 credit.
Who qualifies for a Help-to-Buy ISA?
Help-to-Buy ISAs are intended to help adults (in this case defined as people over the age of 16) to buy their first home in the UK. The key words to note here are first and home. Help-to-buy ISAs are only available to first-time buyers who intend to live in the property they purchase. The terms of the scheme explicitly forbid it from being used to purchase a buy-to-let property but there is nothing forbidding it from being used in conjunction with the rent-a-room scheme in which landlords who are resident in a property can receive up to £4,250 per year tax free by letting out furnished accommodation in their main home. It should be noted that this allowance is per property, rather than per person. In other words, if a couple buy a flat together and let out the spare room the £4,250 allowance would be between them rather than each.
Are there any catches to Help-to-Buy ISAs?
Help-to-Buy ISAs can only be used to purchase a property with a price of up to £250K or £450K in London. That is to say even if the buyer can raise a deposit of more than £18K and/or has sufficient income to make payments on a higher-priced property, they will still only be able to use the funds from their help-to-buy ISA to buy a property up to the permitted price. Whether or not this is an issue in practical terms will depend very much on personal circumstances. Younger first-time buyers looking to buy a starter flat well away from London may find this more than adequate. Older first-time buyers looking for a family home in the Thames Valley area may find it more of a challenge to find something suitable on this kind of budget. It should also be noted that those saving for a deposit have to make a direct choice between a help-to-buy ISA and a normal cash ISA. It is only permitted to open one or the other in any given tax year.
The PDF is basically everything you need to know on this scheme. If you CTRL+F on buy to let you’ll see it’s forbidden but there’s nothing on rent a room
Your home may be repossessed if you do not keep up repayments on your mortgage.
A fee of £595, or 0.65% of the loan amount if greater, payable on completion. For example on a £100,000 mortgage, this would equate to a fee of £650. We will also receive commission from the lender.

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