First time buyer guide

 

Help to Buy ISA

First-time home buyer looking to get on the property ladder? The Help to Buy ISA might be a worthy option to help you get there. Let us explain why.
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What Is a Help to Buy ISA?

A Help to Buy ISA is a government savings scheme aimed at helping first-time buyers boost their mortgage deposit. For every £200 you put into your Help to Buy ISA every month, the government will give you £50 (25% bonus), up to a maximum of £3,000.

How Can I Open a Help to Buy ISA?

Help to Buy ISAs are available from a range of banks, building societies and credit unions to first-time buyers who:

  • Are 16 years old or over,
  • have a valid NI number,
  • are UK residents and
  • don’t own a house anywhere in the world.

If you’re buying with a partner (who must also be buying for the first time), you could get a combined £6,000 government bonus towards your first home.

You’ll be able to open a Help to Buy ISA until 30 November 2019. After this date, they won’t be available any more but you can keep saving into yours if you opened it before then. However, you will need to claim your bonus by 1 December 2030.

How Does a Help to Buy ISA Work?

You can save up to £200 a month into your Help to Buy ISA if the property you want to buy:

  • Is in the UK
  • Costs up to £250,000 (up to £450,000 in London)
  • It’s the only house you’ll own
  • It’s where you intend to live
  • And you buy it with a mortgage (no cash payers)

Plus, you can deposit a sizable £1,200 as a lump sum in your first month to kickstart your Help to Buy ISA.

In order to claim your bonus – the minimum being £400 – you need to have saved at least £1,600 into your account when the house is purchased. If by the time you want to buy you have managed to lay £12,000 aside, you can receive a £3,000 bonus. But, don’t even think of renting out your property or using it as a holiday home!

Can I Take My Money Out Whenever I Like?

Indeed you can, even if you don’t buy your first house or hold a property costing more than the qualifying amount to target. You won’t lose the money and it will still be tax-free and interest-due. However, you won’t get the government bonus, but there’s no penalty attached.

This account also allows you to make partial withdrawals. The amount withdrawn won’t be eligible for the bonus. You can carry on contributing to your Help to Buy ISA and still get the bonus on whatever is left in the account when you decide to use it for a mortgage deposit. Just keep in mind that you won’t be able to put all the money you’ve withdrawn straight back in, the maximum amount allowed per month will still be £200.

Receiving the Bonus

Your government bonus will be given at the completion of the property transaction only. This means that you’ll have to ask your solicitor to apply for it when you’re certain that your first home purchase is about to be closed. The bonus will be added to the substantial sum you’re putting towards your first roof.

How Does a Help to Buy ISA Compare to a Lifetime ISA?

The Lifetime ISA allows you to save more money, but the Help to Buy ISA offers more flexibility. Read our detailed article on Lifetime ISAs and how they differ from Help to Buy ISAs to find out more.

If you’re wondering whether you can have both a LISA and a Help to Buy ISA, the answer is yes. But you can only use the bonus from one of them towards buying a home. So, if you decide to use your LISA bonus to buy your first property, you wouldn’t get the bonus for your Help to Buy ISA but can still keep the money plus its interest in your account and use this money towards buying your house. Going for the bonus in your Help to Buy ISA instead means that using your LISA savings for the property too would be penalised.

Is the Help to Buy ISA for Me?

Well, you can certainly save money into this type of ISA even if you’re not sure that you’re buying your first home. If you don’t actually buy a property, it won’t hurt as the money saved will still be tax free and earn interest.