As part of its continued support of the UK housing market and in an attempt to help first-time buyers onto the housing ladder, the government have introduced the Help to Buy ISA scheme that encourages first-time buyers to save.

The idea is that the savings can then be used to help with the costs of buying a first property. With a tax free bonus equivalent to 25% of the sum saved, the Help to Buy ISA is worth considering, although along with the benefits there are some drawbacks.

Here are the main pros and cons;

• The ISA is available from a variety of banks, so you have choice, allowing you to pick the best interest rate and terms available. You can also transfer cash from an existing ISA, but only up to the maximum amount that you can invest to start the ISA, namely £1,600.
• Transfer your ISA between providers for Free! As long as you undertake an official ISA transfer, you can move your ISA between providers. Also, you don't have to close a previous years' cash ISA to open a Help to Buy ISA although you can only pay into one cash ISA (e.g. a Help to Buy ISA) and one stocks & shares ISA in any one tax year.
• Interest is tax free as with other ISAs, although in today’s market it’s likely to be at quite a low rate.
• The primary ‘pro’ must be the Government's 25% tax free bonus! This is payable on the total amount saved but capped at £3,000 per individual. The maximum you may save is limited to £12,000 per person over the maximum 5 year period of the ISA.
• The maximum you may save per annum is £200 per calendar month or £2,400 per annum and to qualify for the 25% Government Bonus you must have at least £1,600 saved. ISAs are available until 2019 and bonus’ should be paid until 2030.
• You can access your cash, plus the tax-free interest they've generated, at any time. However, if you access the cash before you buy a home you'll forfeit the Government bonus - which is really the most attractive thing about the scheme.
• You can use the cash you save (and interest) towards a deposit, but the remaining cash (the bonus) must be applied for buy your solicitor at completion and so this money can only really be used to pay for cash expenses, or to pay down a part of your loan, assuming your loan agreement allows for this.
• If you and your partner are both first-time buyers then you have double the savings allowance and therefore double the Government bonus available to you.
• This scheme is only open to first-time buyers, so if you or your partner have ever owned property before, anywhere in the World, you are not eligible.
• This ISA scheme can be used in conjunction with other first-time buyer schemes including the Government’s Help to Buy and shared ownership.
• There is a price cap on property value, set at £250,000 outside London or £450,000 inside London - and you must buy the property with a mortgage.

For advice on how to best use the Government’s schemes contact Mortgage Required on 01628 507477 for an initial chat and advice.

Related articles:

• What's the Difference Between a Help to Buy ISA and Normal ISA?
• Lifetime ISA's Explained

You may also be interested in:

• Help to buy Equity Loans
• Shared Ownership (New and Second Hand Homes)