This week the government have launched the Help to Buy ISA to help first time buyers get their foot on the ladder by contributing a tax-free cash boost of up to £6,000 for couples or £3,000 per person.
Introduced on the 1st December 2015, the tax-free accounts are for those saving for their deposit on their first home purchase. The government will top up these savings by 25% of the value saved in an effort to help first-time buyers onto the property ladder.
Available from 14 banks or building societies, Halifax is so far offering the best deal with a 4% interest rate, while Virgin Money offer 3% and Natwest, Nationwide, HSBC and Llyods Bank are all currently offering interest of 2%.
How it works
The ISA allows first-time buyers to save a maximum of £200 a month, this will then be topped up by £50 (or 25% of the amount they decide to save each month). To kick-start their account, they can also choose to open their account with an initial one-off lump payment of up to £1,000, in addition to the monthly maximum of £200.
The maximum Government bonus the Government will issue is £3,000, therefore savers will need to have saved £12,000, giving a £15,000 deposit. The minimum required to be saved is £1,600 to receive a £400 bonus.
Couples are both eligible if they are buying together, meaning a potential boost of up to £6,000 towards a deposit for a first home. Anyone who has never owned a residential property, either inside or outside the UK and is over the age of 16 can open an account anytime between 1 December 2015 and December 2019
When it comes to purchasing your first, your solicitor/conveyancer will apply for the government bonus on your behalf. This will then be added to the deposit. People putting money into the Help-to-Buy ISA who then change their mind about purchasing property will not receive the government bonus if they do not buy a home.
The bonus scheme is set to keep paying out on Help to Buy ISA savings until 2030. So you could put in just a small amount per month and take years to build up your bonus. However, you risk a future government changing the rules before 2030, meaning they may stop paying bonuses.