Help To Buy ISA

Read how your Help to Buy ISA could help you get on the property ladder

Help to Buy ISAs are no longer available to new applicants. If you got a Help to Buy ISA before the 30th November 2019 deadline, you can continue to save into your account until November 2029. Here’s everything you need to know

If you open a tax-free Help to Buy ISA, the government will chip in with a cash contribution worth 25% of what you stash away. Over five years, that would add £3,000 to your balance if you saved the maximum of £12,000.

Find out more about how Help to Buy ISAs work, and when you’ll get the government’s contribution, here.

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What is a help to buy ISA?

A help to buy ISA is a type of savings account that the government will top-up with a 25% bonus if you meet certain savings targets.

What if I missed the deadline?

If you missed out on a help to buy ISA, don’t fret, the government’s Lifetime ISA also offers a 25% bonus for first-time buyers.

How does the help to buy ISA work?

If you had already opened a tax-free help to buy ISA before 30th November 2019, the government will chip in with a contribution worth 25% of what you save.

The most the government will contribute is £3,000 – but you need to have paid in £12,000 to get this. If you paid in £1,200 during your first month (which is the only time you could have done so) and put £200 away every month (the maximum monthly contribution thereafter), you’d take four years and seven months to hit the target.

You don’t need 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.

How long can I keep my help to buy ISA?

You can keep saving into the ISA until 30 November 2029. The deadline for claiming the help to buy ISA bonus from the government is on or before 1 December 2030.

How much bonus can you earn?

The table below outlines how much you can earn as a bonus depending on how much you pay in:

Amount you must save

Bonus

Total

£1,600 (minimum amount)

£400 (minimum bonus)

£2,000

£2,000

£500

£2,500

£3,000

£750

£3,750

£4,000

£1,000

£5,000

£5,000

£1,250

£6,250

£6,000

£1,500

£7,500

£7,000

£1,750

£8,750

£8,000

£2,000

£10,000

£9,000

£2,250

£11,250

£10,000

£2,500

£12,500

£11,000

£2,750

£13,750

£12,000

£3,000 (maximum bonus)

£15,000

How is the bonus paid?

It’s important to note that you won’t actually receive the money until you’ve completed the purchase of your first home – which also means the government bonus can’t be used for a deposit to secure your property.

However, when you’re ready to take out a mortgage, you can choose any kind of mortgage from any provider, as long as it is a residential mortgage and not a buy-to-let mortgage.

Once the purchase has completed, the money goes directly to your mortgage lender via the solicitor who is managing your property purchase.

If you’re concerned you won’t be able to afford the initial deposit without receiving the bonus, it’s worth asking the seller’s solicitor if you can pay a smaller deposit at this stage and pay the remainder at completion, when you have received your bonus.

If the seller won’t allow this, you’ll need to fund the shortfall yourself and then use the bonus towards your mortgage payments.

Your solicitor will only be able to apply for the government bonus once you’ve provided him or her with a closing letter from your help to buy ISA provider. There will usually be a charge from your solicitor for sorting this out, typically around £50.

If you decide you don’t want to buy a property after all, you won’t be entitled to a bonus – but you’ll still get your savings and any interest you’ve earned.

How can I use the money?

The money you save into a help to buy ISA must be put towards a property which costs no more than £250,000, or £450,000 if you live in London.

If you’ve got £1,200 or less in your 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 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.

The downside 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 provider, 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 it can be if you want.

How to manage my account?

You can make withdrawals from your account whenever you want, but you won’t be able to claim any bonus on the funds you’ve taken out.

Interest on your account will usually be calculated daily and paid yearly on the anniversary of the date you opened your account.

Savings held in a help to buy ISA are covered by the UK Financial Services Compensation Scheme (FSCS), which protects up to the first £85,000 (as of January 2017) per person, per financial institution in the event that the bank or building society supplying the account goes bust.

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