Find out more about how the Help to Buy ISA works
If you have a Help to Buy ISA it can be a great way to save up a deposit. But how is the bonus paid and when can you use the money?
While Help to Buy ISAs are no longer available to new applicants, if you opened a Help to Buy ISA before 30th November 2019 you can continue to save into your account until November 2029.
If you didn’t get a Help to Buy ISA in time – you can still open a Lifetime ISA (if you meet the eligibility criteria). Cash based Lifetime ISAs can also be an ideal way to save towards the deposit on a first home.
Here’s everything you need to know about the Help to Buy ISA for existing account holders:
What is a Help to Buy ISA?
A Help to Buy ISA is a type of savings account that the government tops up with a 25% bonus, if you meet certain savings targets.
How soon can I get the government bonus?
If you opened a Help to Buy ISA before the 30th November 2019 deadline, the government will chip in with a contribution worth 25% of what you save.
The maximum amount the government will contribute is £3,000 – but you will need to pay £12,000 to get this. So, if you’ve made an initial deposit of £1,200 during your first month (which is the only time you could have done so) and stash £200 away every month (the maximum monthly contribution thereafter), it would take you four years and seven months to hit the target.
You don’t have to save the full £12,000 to receive a bonus, as the government will top up your savings once you’ve paid in £1,600.
Are Help to Buy ISAs still available?
Help to Buy ISAs are no longer available to new customers. A similar scheme – the Lifetime ISA is another option for young people saving towards a first home.
Lifetime ISA – or LISAs – are available for those up until the age of 40 and also offer tax-free saving. You can opt for a cash LISA or a stocks and shares LISA.
The cash-based accounts are typically used for people saving towards a first home deposit – as there is no risk to your savings and the government pays a bonus. Stocks and shares LISAs might suit those who are saving for later life. Moneysupermarket has stocks and shares Lifetime ISAs so you can compare and see what might suit you best.
What to do if you still have a Help to Buy ISA
If you do have a Help to Buy ISA then the government will still top up your savings by 25% when you buy your first home. You can pay in up to £200 each month. If you buy your first home with someone who also has a Help to Buy ISA, then both of you will get the 25% bonus. You can continue paying into the ISA until November 2029. You can claim the 25% bonus until November 2030. The solicitor or conveyancer will apply for the government bonus on your behalf at the point you buy your first home
What are the Help to Buy ISA rules?
You can only use the Help to Buy ISA to buy your first property. The house you buy must meet these criteria:
Be the only home and property you own
Be within certain price limits, depending on location. The help to buy maximum for a property in London is £450,000 and outside of London is £250,000
Be where you plan to live (i.e. not let out to tenants)
If you’ve got £1,200 or less in an existing cash ISA, you can transfer this money directly into a Help to Buy ISA. You’ll have to move the full amount, though – partial transfers aren’t allowed. Some Help to Buy ISA providers, however, allow what is known as a ‘split ISA’. This means that you can effectively hold a Help to Buy ISA and a cash ISA in the same wrapper, provided their combined value doesn’t exceed the £20,000 maximum you can invest in ISAs this tax year. One of the limitations of opting for a split ISA is that rates may be lower if you link your ISAs together. You don’t have to take out your mortgage with the same provider as your ISA. You can choose any kind of mortgage from any lender, as long as it is a residential mortgage and not a buy-to-let mortgage. The mortgage you choose does not have to be a Help to Buy mortgage, although you can get this if you want.
What withdrawal options are available with Help to Buy ISAs?
You’re able to transfer and withdraw money from your Help to Buy ISA whenever you’d like. However, you can’t claim a government bonus on money you’ve withdrawn as that’s worked out on your closing balance.
Can I change to an alternative Help to Buy ISA provider?
Yes, you’ll be able to change to another Help to Buy ISA. You’ll have to contact your current Help to Buy ISA provider to arrange this. You’ll need to find out if the provider you want to switch to offers the equivalent ISA and allows transfers in. You’ll be able to transfer funds in your Help to Buy ISA to a Lifetime ISA – although this will contribute towards the maximum amount of £4,000 that can be saved during the tax year.
If my property purchase fails, can I re-open my Help to Buy ISA account?
Yes, you’ll be able to reopen your Help to Buy ISA if your property purchase falls through. You will have to present a Purchase Failure Notice to your provider. You can obtain this from your solicitor or conveyancer. You will have to reopen your account within 12 months of the date you closed your account.
What other schemes are there for home buyers?
If you missed out on opening a Help to Buy ISA there are still similar schemes available that can help you save towards your first home.
Shared ownership is a type of affordable homeownership that allows first-time buyers to buy a share in a new build property. With shared ownership, you can take out a mortgage for a share you own (normally between 25% and 75%). You then pay rent on the remaining share. Because you’re only paying a mortgage on the share you buy, the amount needed for a deposit is considerably lower than if you decided to buy a house outright.
Shared equity is another affordable homes scheme. Shared equity works by giving you a loan that will form part of the deposit for the house you want to buy. Then you take out a shared equity mortgage on the remaining part of the house's value.
Lifetime ISAs are a type of ISA also designed to help people save for their first property or retirement. Like a Help to Buy ISA, you can also get a government bonus of 25%. There are cash Lifetime ISAs and stocks and shares Lifetime ISAs available. The cash based accounts are more likely to suit those saving for a home deposit, where the stocks and shares LISA may suit those saving for old age.
If you’re looking for an ISA to open, find the best value ISAs we have available and our handy filters allow you to sort by rate letting you know the interest you could earn.
How to close a help to buy ISA?
You can close your Help to Buy ISA online or in person. If you opened your ISA with a bank for example, you can visit them in-branch and close it. You can also close your ISA online by visiting your provider’s website and following the instructions on how to do so. Once you’ve closed your account, you’ll be sent a Help to Buy closing statement and you’ll need to give this to your solicitor, and this will be used to apply for the government bonus.
Other useful guides
We have a wide range of guides to help you with buying your first home:
Compare savings products with MoneySuperMarket
While Help to Buy ISAs are no longer available, we have a full range of savings products, including cash ISAs, fixed rate bonds and easy access accounts for you to compare.
You can see our accounts ordered by interest rate, term, and minimum and maximum deposit. So you can quickly and easily find the one that suits you best.
Can I still get a Help to Buy ISA?
No, the deadline to open a Help to Buy ISA was 30th November 2019.
What replaced Help to Buy ISA?
Lifetime ISAs are a similar scheme to Help to Buy. But Lifetime ISAs offer the choice of cash or stocks and shares investment. Most young people who are saving towards a first home opt for the cash-based Lifetime ISA - as your deposits are safe. The value of money invested in a stocks and shares Lifetime ISA can rise and fall over time. Lifetime ISAs pay a 25% bonus on your savings. You can take one out up until the age of 40.
A stocks and shares Lifetime ISA can be a good option for long-term saving – perhaps towards your old age. You can access the money without penalty (if you haven’t used it for a first property purchase) at the age of 60.
Will Help to Buy ISA come back?
There have been no announcements from the government to bring back the Help to Buy ISA.
Can Help to Buy ISA be used for a buy to let property?
No, the property you buy must be one you intend to live in.