Help to Buy ISA
Help to Buy ISA: what’s the latest?
For many young people looking to get on the housing ladder, the Help to Buy ISA has been a lifeline. It has offered lots of people the chance to boost their deposits for a first home by several thousands of pounds which, in some cases, has made all the difference. However, with government schemes such as this one, the detail is never quite as simple as the headline claims first appear.
For one thing, the scheme has now closed to new registrations – meaning that only those who signed up prior to it closing will be able to access the cash. How does it work for those who did sign up, and how long do you have to save? This article will explore the answers to these questions and more
How does the scheme work?
The Help to Buy ISA was designed to assist people who have never purchased a home before – or “first-time buyers”, as they are known – to tackle a key issue: deposit size. With the average British house deposit resting at over £30,000 in recent years, it’s no wonder that many young people felt like they couldn’t get on to the housing ladder. However, with a scheme like this on their side, things began to look at least a little easier.
The way the scheme works is as follows. If you opened an account in time (see below) with a bank or building society, each monthly saving of up to £200 would see you net 25% from the government. In other words, each time you saved £200 you’d get £50 back from the government – or each time you saved £100 you’d get £25, £12.50 for £50, and so on.
In order to cash out, you have to save £1,600 at least – so the bonus doesn’t come until you’re at that level. With a cap of £3,000 in place on the amount you can receive in the form of government bonuses, you won’t be able to keep saving forever.
Claiming your bonus as part of the Help to Buy ISA is not difficult, but it doesn’t come until the very end of the process. You will need to tell your provider that you don’t want to save any further because you’re now at a stage where you’re ready to buy. After that, your conveyancing solicitor will need to make sure they go through an application process to get the cash ready to go.
What’s the timeframe?
The main development in the life of the Help to Buy ISA scheme in recent months has been that, while the scheme is still functional, it no longer accepts new applications. The deadline was midnight on 30th November 2019 – so if you didn’t sign up in time, it now won’t be possible to access the benefits. The good news is that if you did sign up, the government subsidy will continue until well into the new decade.
You can make deposits up until November 2029, so there is almost a whole ten years of savings time available. For those planning to buy their first home in the medium to long term, this is a real godsend – and could mean that first-time buyers have a very positive decade in the housing stakes on the whole.
What alternatives are there?
If you didn’t sign up to the scheme or if it’s not right for you for some other reason, it’s worth investigating a range of other options which can help you get your deposit value up. One such option is to change your financial situation if at all possible. Maximising your income, perhaps by taking on a second job, is one option, while cutting back on certain areas of spending is another.
This is perhaps easier said than done – although by taking an honest and focused look at your income and outgoings, you may find it is possible to squeeze in savings that could replace the £50 bonus the government would have given you if you had signed up in time.
One reason why a Help to Buy ISA may never have been right for you in the first place is if you already own a property. This would have precluded you from taking out an account under the scheme, as it was not possible to receive the subsidy for a deposit on a second property. If that’s the case, you may need to get more creative about how to enhance the value of the property you currently own.
You may, for example, be able to add value to your property by renovating it. If you have a garden space, this renovation could be achieved through an extension which adds a second bedroom or a space such as a sunroom to the property. It’s also worth thinking about reconfigurations too – and thinking outside of the box as you do so.
Could a room which is currently used for one purpose be used for something else, for example? Large living rooms can often be converted into kitchen diners, say, freeing up space for bedrooms. By thinking carefully about how to get the most out of your property’s sale value, you can enhance your next deposit even though you’re not eligible for a Help to Buy ISA.
The government’s Help to Buy ISA scheme has, largely, been a success. It has given many people the opportunity to enhance the amount of deposit they have available to pay for that all-important first property and has helped them get on the housing ladder – something that might not have been possible otherwise. While the scheme is now closed to new applications, those with accounts can save for a decade – meaning that the long-term positive effects of the scheme might not yet be fully visible.
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