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1st April 2015

First-time buyers need to save only £8,000 to get a mortgage for a £200,000 home, following the launch of the Help To Buy Isa in the Budget last week.

The tiny deposit required is possible because of a combination of the lucrative bonus from the new Isa and existing homebuyer schemes that offer interest-free loans.

With the Help To Buy Isa, the Government rewards savings of £200 a month with a £50 bonus. First-time buyers can also snap up a new-build home with just a 5 per cent deposit by using the Help To Buy scheme. With this, the Government offers a 20 per cent interest-free loan for five years. This means the buyer needs to borrow only 75 per cent of the property value as a mortgage.

So, someone buying a £200,000 flat needs a deposit of just £10,000. But if they saved this in a Help To Buy Isa, they’d pay in £8,000 and the Government would top this up to £10,000 with a £2,000 bonus.

The Help To Buy Isa is expected to be on sale in the autumn from banks and building societies. The maximum bonus from the Government is £3,000 on savings of £12,000, and the minimum is £400, meaning you have to save at least £1,600 to qualify.  Savers can open their account with £1,000, in addition to making monthly contributions of up to £200. Accounts are limited to one per person — not one per house — so couples buying together could get a £6,000 bonus.

The savings bonus will be available on home purchases of up to £450,000 in London and up to £250,000 elsewhere, and is not limited to properties available under the Help To Buy scheme; you could use it for any house or flat. The bonus will be paid when the home is bought, and there is no time limit on how long first-timers can save. And, on top of this, other perks already exist for first-time buyers.

 

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-3009921/First-time-buyers-need-save-8-000-mortgage-200-000-home-following-launch-Help-Buy-Isa-Budget.html#ixzz3VOYo9ZRD