Do you want a £3,000 free gift from the Government?

publication date: Jul 6, 2015
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Up to £50 a month free money via George Osborne’s Help to Buy ISA


New House

If you are a first time buyer or planning to be in the next few years, having the current Conservative government in place is a bonus.

There are two things this government aims to do when it comes to housing:-

  1. Continue to make buying and owning a home attractive

  2. Build more private homes

The options available for anyone buying a property up to £600,000 in England are that if you buy a new build under the Help to Buy Scheme the government will give you a loan, which is free of interest for the first five years, for up to 20% of the value of the home.

To find out more about how the Help to Buy new build scheme works, watch this helpful video from Mortgage Advice Bureau.

Now there is a new offer, which for those who didn’t think they afford to save for a deposit, should at least consider. It’s called the Help to Buy ISA.

Read - Help to Buy a New Build Checklist

Help to Buy ISA

What is it?
This is a scheme whereby you open an account with a building society/bank (it is yet to be confirmed who will take part) and then if you save up to £200 a month, the government will top up your savings by 25%, helping you get on the ladder faster.

When can you invest?
Estimates are it should be from September, but you can even start off with £1,000, so it’s worth starting to save now.


HELP TO BUY ISA CHANGE IN BUDGET: Originally planned for September, this now starts on the 1st December


What’s the limit?
The government will top up your savings for a deposit by 25% up to £200 a month, with a maximum of £3,000. However, if two of you are intending to buy, you can both have separate ISAs, so couples/partners will get up to £6,000.

Can the deposit be used with other schemes such as Help to Buy and Shared Ownership
Yes it can, but it must be your first home. This means not only do you get a 25% top up to help save for your deposit, but you can also get up to a 20% loan which is free of interest for five years. These are seriously big ‘gifts’ for those wanting to get on the ladder.

Read - Help to Buy a New Build Checklist


Will this make any difference to first time buyers?
Absolutely. Firstly many FTBs are being told they have to save tens of thousands of pounds because that’s the ‘average’ deposit first time buyers put down – around 25%

However this doesn’t mean you ‘have to’ put down a 25% deposit, most lenders are happy now to lend at 95%, so you actually need a fifth of the deposit often quoted.

Saving £100 per month for three years with the government’s Help to Buy ISA

  • £100 x 36 months = £3,600 
  • Add in 25% from the government = £900
  • You would actually have a deposit of £4,500 or £9,000 if there are two of you

What priced house would this buy you with a 5% deposit?

  • With £4,500 deposit you could buy a house for £90,000
  • If there are two of you this would double to £180,000

Where could I buy for £90,000?
Currently there are 3 regions whose average property prices is less than £125,000, so there will be one or two bed properties available for this price.

If you save as a couple, then you will have the average price for a house in England and Wales according to the Land Registry.

Read - Help to Buy a New Build Checklist

What do first time buyers normally spend on their first home?
According to the Council of Mortgage Lenders, London first time buyers spend around £300,000 on their first home, whereas outside London it averages around £150,000.

So even if saving £100 a month only secures you £45,000 or £9,000 for a deposit, in expensive areas, this could help you get on the ladder via shared ownership schemes.



All our information is brought to you by Kate Faulkner, author of Which? Property books and one of the UK's top property experts.
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