*This post was written over 4 years ago so the information is outdated. The Help to Buy ISA is no longer available but there are other ways you can save and invest to buy a home.
The Help to Buy ISA could be helping hand you need to get on the property ladder, with an added boost of a 25% government bonus on top of your savings for a deposit on your first home.
What is a Help to Buy ISA?
This is a government backed scheme, established in 2015 to help you to save for a mortgage deposit. Just like with any ISA product, savings are tax-efficient.
However, this type of ISA has the added benefit of government contributions.
For every £200 you save, the government will contribute an additional £50. The bonus that you receive (up to a maximum of £3,000) will help you to increase the size of your deposit and reduce the size of your mortgage.
Be aware, you can only use your Help to Buy ISA to purchase a home worth a maximum of £250,000, or £450,000 in London.
How does the Help to Buy ISA work?
• Open your Help to Buy ISA with an optional initial lump sum deposit of up to £1,000 – then save up to £200 per month.
• To receive a bonus, you will need to have saved at least £1,600.
• Qualifying for the maximum bonus of £3,000 will take at least four and a half years, based on the maximum saving of £200 per month.
• You may withdraw money from your ISA at any time. However, as the minimum government bonus is £400, you will need to save at least £1,600 before you are eligible to receive a bonus.
• If you are buying your first house with your partner, you can both have a Help to Buy ISA providing you both meet the criteria. Together, you could earn a bonus of £6,000 towards your first mortgage deposit.
• When you’re ready to purchase your first home, your solicitor or conveyancer will apply for the bonus, which will be added to the money you put towards your first home.
• A closing statement from your Help2Buy ISA provider is required to get your bonus.
• Mortgage lenders will ask for evidence of the funds that you have available, including the amount you have saved in your Help to Buy ISA.
• Your lender will then include the amount of your government bonus when working out your mortgage loan amount.
Important information: You can put your help to buy ISA towards your mortgage deposit, not your exchange deposit (also known as a contract or holding deposit). The government will only pay out the bonus once the sale of the property is complete and contracts have exchanged.
Am I eligible for a Help to buy ISA?
To understand if you are eligible for a Help to Buy ISA, consider the following:
Eligible:
- First -time buyer
- Age 16+
- National Insurance number
- UK Resident
- Buying a home worth under £250,000
- Buying a home worth under £450,000 in London
- You will be the account holder
Not Eligible:
- Buy-to-let
- Buying overseas
- Opening cash ISA in same year*
- Already have a Help to Buy ISA
*If you already have a cash ISA, you can still open a Help to Buy ISA, but you may need to take additional steps.
Help to buy ISA – Key Facts
1. To qualify, you cannot own a property anywhere else in the world.
2. The minimum amount you need to save to qualify for a government bonus is £1,600.
3. The government will give you a bonus worth 25% of what you pay in, up to a maximum of £3,000.
4. Created for first time buyers over 16.
5. Available until 30th November 2019.
Lifetime ISA
Another option for people saving to buy their first home is a Lifetime ISA. This is a newer product released as an alternative to the Help to Buy ISA in April 2017. There are differences between the two, such as a Lifetime ISA can be used to build a retirement savings pot.
