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Help to Buy Isa

What you need to know

Whether at your local branch, through online banking notifications or whilst watching television, it is likely that you have heard of the new Help to Buy savings Isa. In a nutshell, this new saving’s account allows those looking to purchase their first home the chance to boost their savings. For every £200 you save (per month), the government will put an additional £50 into your account; that’s a potential of 25% of bonus savings!

The Benefits

If you are looking to buy a your first house with your partner, providing neither of you have owned a property before, you are entitled to apply for separate Help to Buy savings accounts, meaning double the saving capability.

Let’s talk finances:

  • You can make an initial deposit of £1,200, followed by monthly deposits of £200.
  • There is no minimum amount for your first deposit payment
  • There is a minimum bonus size of £400 per person and a maximum bonus size of £3,000 per person

Once you have set up your account, it is also possible for you to switch banks with your Help to Buy Isa, should you require. The government will release your money when you buy your first house.
For more information: GOV.UK has put together a fact sheet containing some useful information regarding the new Help to Buy Isa.

saving-for-house-deposit

Photo credit: Suwicha/Shutterstock 

The Downfalls

Unfortunately, some couples might have to compromise on their dream location as properties surrounding London may have higher price tags, which would mean they do not qualify for the Help to Buy Isa scheme. You might also be restricted to using certain lenders.

Let’s talk finances:

  • Your loan will be increasingly expensive
  • Your loan amount is not fixed
  • The government bonus applies to homes priced up to £250,000 outside London and up to £450,000 in London.
  • Negative equity is a danger
  • Fees and other terms could change

You must be sixteen or older in order to apply for the Isa.

For more information check out MONEY.co.uk who have a useful information sheet for those looking to open a Help to Buy Isa.

 

With all things considered…

This loan is suitable for most first-time buyers looking to buy their first home. Applicants who may find the loan restrictive are those with families looking to move to an expensive area.

Watch out for…

Help to Buy Headaches

At some banks, if you have an existing account at an old address, you will be required to provide a form of personal identification and a proof of current address. Ironically, if your driver’s licence is registered to you previous address, you will be asked to provide your passport instead, as the bank requires continuity of information. It can then take up to thirty days to process this new change of address and an additional five days for your Help to Buy Isa application to go through, meaning if your passport is being looked after by a parent or family member, you’ll need to retrieve it quickly, or risk losing out on two months of potential savings.

 

Help to Buy Equity Loan

If you’re looking to move to an area that is slightly more expensive; the Help to Buy Equity Loan might offer you more options. As stated on Helptobuy.gov, ‘With a Help to Buy: equity loan the Government lends you up to 20% of the cost of your new-build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home.’

The Benefits

This loan is not restricted just to first time buyers. Homeowners looking to move are also eligible, provided that the house they are looking to purchase is under £600,000. Consequently, more locations across the company become a possibility.

first-time-buyer-help-to-buy-isa

Photo credit: Monkey Business Images/Shutterstock 

The Downfalls

You cannot own multiple properties at the time of application, which considering the type of loan, this stipulation is reasonable. Similarly, you cannot sublet the property, make modifications such as extension on it and you are not permitted to take out another loan without permission from a Post Sales Help to Buy Agent.

Let’s talk finances:

  • If the value of the property rises, you loan repayments will also rise.
  • Your household income must not exceed £60,000 per annum at the time of application.
  • You are not permitted to increase your mortgage repayments without approval from a Post Sales Help to Buy Agent.

 

With all things considered…

This loan is suitable to most applicants wishing to buy a new build home. You should take the time to carefully consider how much you can afford to repay against how much space you may need in the not too distant future.

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