The typical first-time buyer needed a deposit of 18.6% in May 1 with the average starter home costing £211,000 2. This suggests it would be necessary to save a deposit of £39,250, as well as the money you need to pay legal and other fees.
But there is good news for first-time buyers – the Government wants to pay some of your deposit!
From 1 December 2015, you’ll be able to open a Help To Buy ISA with a starting balance of up to £1,000, then save up to £200 per month. When you spend this ISA money to buy your first home, the Government will top up your savings by 25% – if you’ve saved £12,000 or more, they’ll contribute the maximum bonus of £3,000. The extra good news is that you can have a separate Help To Buy ISA per person (over the age of 16), so couples could get up to £6,000 towards a deposit for their first home.
Help To Buy ISA accounts will be available to open for the next four years. Once you’ve started one, you can use it to save for as long as you want.
This could be a good way of building your own deposit, or you might use it to help your children get onto the housing ladder by paying into their Help To Buy ISAs.
You can use your Help To Buy ISA in conjunction with other schemes such as shared ownership and other elements of the Help To Buy scheme.
Of course, there are a few restrictions. For example, you must live in the home yourself and only properties up to £250,000 (or £450,000 in London) will be eligible. What’s more, it is not possible to have both a Cash ISA and a Help to Buy ISA in the same tax year. This means that if you already have a Cash ISA for the tax year 2015/2016 it will not be possible to open a Help to Buy ISA until the tax year 2016/2017.
At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters. Please call us on 020 8655 8488.
The information in this article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
1 Council of Mortgage Lenders
2 Office of National Statistics