A lot of people have been asking me for a video on the Government’s Help To Buy ISA For first time buyers so I wanted to share my personal experience of why it was a total waste of time for our house savings over here on the blog too for anyone looking into what the best savings or investment schemes there are for first time buyers like us.
The Help To Buy ISA was introduced to help people get on the property ladder, so I went ahead and joined the scheme and signed up through my bank to get my own Help To Buy ISA. However, it came to light that there are so many restrictions for how you can use the scheme, so I thought I would share my story, and also the pro’s and con’s of the product if you also have your savings in a Help To Buy ISA.
Check out the video for more about my experience with the Help To Buy ISA and why it was all wrong for us.
What Is A Help To Buy ISA?
The help to buy ISA was created by the Government and is designed to help you save for a mortgage deposit to buy a home. To qualify you must be classified as a first-time buyer and not own a property anywhere in the world. You can save £200 each month after the initial max £1,200 to open the account and the Govt. will give you a 25% bonus on your savings for anything up to the value of £12,000 – this means that you will receive a 25% bonus of £3000 on savings of £12,000 making your total £15,000 towards your first home – this is paid upon exchange. Anyone over the age of 16 can open an account if they are looking to buy their first home. A minimum of £1600 has to be in the account to qualify for the 25% bonus and there are some further restrictions which I will share with you further down the post.
Pro’s & Con’s Of The Help To Buy ISA For First Time Buyers!
Pro’s
This is a good scheme for people with time on their side – a 16 year old can open the account and by the time they reach their twenties they could have £15,000 to put towards their first home.
The Help To Buy ISA is also great for low-income earners, as there is no minimum amount you can save each month – if you can’t afford to save from month to month that is fine. I would recommend always saving the max £200 each month though if you are hoping to buy in the next few years.
The Govt. is essentially giving you 25% additional to what you have in your savings.
Con’s
Now this list is slightly longer, and it forms the basis of why I cancelled my Help To Buy ISA and why, for us, it was a total waste of time!
It will take a minimum of 4 years to get to a point where you can put the money towards your first home – not great if you’re in a hurry.
There is a cap on the purchase price of the property you’d like to buy – this essentially was the whole reason I closed my Help to Buy ISA. £250k for outside of London and £450k for London – we live in the home counties and for a family of 4 it’s just not possible to buy a house for this price and therefore the scheme was useless to us sadly! Obviously for people buying a 1 bed apartment or in a different region of the UK this would be more appropriate.
The property you purchase has to be your only residence and the only property you own – this scheme is not for investors, buy to let, HMO’s etc. And so it should be as this is a scheme to help people onto the ladder.
It’s not a great ROI – There are better accounts out there for if you want to maximize your savings – Bonds, Shares, your own business etc.
You will only ever end up with a £15,000 deposit with the Help To Buy ISA scheme – as above, this isn’t anywhere near enough for a property within our requirements, however if you’re buying a small flat for example, this would work better for you.
In summary, I would say that the Help To Buy ISA scheme is good if you have time on your hands, if you’re on a lower income or wanting to buy a lower value property. But for our first time buyers situation, it just didn’t work for us. Let me know if you’d like a pro’s and con’s list for the LISA scheme and if this was helpful, why not share it!
Do you have a The Help To Buy ISA?
What do you think?