It’s known that the juiciest items are always held back until the end of a government announced budget. It’s usually related to the fun things, the life changing things, the things that will make you forget about the drudgery of the previous figures. The latest budget was no different. One of the ‘prizes’ was the newly announced Help To Buy ISA, where the government would give you £50 for every £200 you saved. We don’t advise on investments by the way, but we can put you in touch with those that do. This should not be taken as advice, but more as food for thought.
The Help to Buy ISA sounds fantastic; not only would it be tax-free, it would also be topped up by a whopping 25%. Surely there must be a catch somewhere?
Well, to begin with you must be a first time buyer. If you have already owned a property in the past you will not qualify for this scheme. This seems fair enough, although frustrating if you sold up before the crunch and are struggling to get back on the ladder. But the top ups promised are significant, so it only seems fair to give it to those that need it the most.
Perhaps the biggest disappointment of the scheme is the way the caps will work. For instance, you can only deposit £1,000 once when you open the account and then only £200 a month thereafter. Assuming you have the £1,000 to start with, this means it will take you a minimum of four and a half years to save the £12,000 figure needed to get the max £3,000 pay out. If you don’t have the £1,000 to start with, then this increases to five years. And because each month is capped, you can’t catch up if you get behind; if you stop for a few months at Christmas and a few months in summer your target date stretches away seven and a half years in to the future.
The scheme is great for those currently saving towards a property but, in order to be effective, planning and discipline are essential. If a couple have £2,000 and are able to put away £400 a month without fail, they could quite reasonably expect to have the funds to purchase a property valued at the maximum figure of £250k outside London. Yet, for those looking to buy in London I suspect this will do little to brighten their day. According to Plentific, in order to afford a £450,000 home within the four and a half years the scheme requires, you would need to put away a whopping £1,421 a month, each and every month without fail, and that’s ignoring the very relevant property inflation figures.
All in all, the scheme should be welcomed but it isn’t quite the revelation we were expecting it would be. As ever, planning is the key to success when buying a new property – you can read our guide here. However and whenever you are able to get your deposit together, AALTO Mortgage and Property Solutions are happy to talk to you at any stage, from simple fact finding right up to you finding your dream home. You can call us on 0207 183 1101.
Your home may be repossessed if you do not keep up repayments on your mortgage.