Understanding a new Help-to-Buy ISA

The newly launched Help-to-Buy ISA has the aim of helping those wanting to purchase their first new home to make the most of their savings.

First time buyers who use the ISA to save for their first home will be handed £50 for every £200 they save.  The first £200 monthly payment can be boosted by an initial deposit of £1,000.  The government will add a bonus amount to this initial deposit of £250.

For savers to take advantage of the government's maximum contribution of £3,000 they will need to save £12,000 in their Help-to-Buy ISA.

The Telegraph Money page has calculated it will take just over four and half years (55 months) for a first time buyer to save up to the maximum £12,000, which will then be topped up by the government's contribution of £3,000.  To reach this conclusion, The Telegraph assumes that the initial contribution of £1,000 will be made and from then on £200 per month is invested.  They have not taken into account the varying rates of interest offered by providers so this amount may be reached slightly earlier or later depending on the choice of provider.

The Help-to-Buy ISA is intended for house purchases and can only be used by residential buyers.  As with all things, there are terms and conditions which are ably explained by The Telegraph.

However, for those intending to purchase their new home in the near future, the Help-to-Buy ISA offers a step towards this goal.