If you qualify for a Help to Buy ISA bonus it will be paid when you complete your property purchase, but cannot be included as part of your mortgage deposit.
What is it?
It is a tax free individual saving account that pays you a 25% bonus up to a maximum of £3,000.
It is exclusively for first time buyers to help them build up their savings to buy a home.
You can withdraw money from the Help to Buy ISA at any time, but can only put in up to £200 a month.
For example, if you pay in £200 and withdraw £150 in the same month, you cannot pay any more back into your Help to Buy ISA until the next month.
Do you qualify?
To be eligible for a Help to Buy ISA, you must be:
A first time buyer
At least 16 years old
The Help to Buy ISA is available in banks and building societies across the UK.
You do not need to get a mortgage with same provider as your Help to Buy ISA.
How much can you pay into it?
You can pay in up to £1,200 in the first month of opening the account and a further £200 every month afterwards until you are ready to buy your first property.
If you pay in the maximum amount every month, you will save £3,400 in your first year.
Can you transfer another ISA into a Help to Buy ISA?
Yes, but only up to £1,200 when you open your Help to Buy ISA.
If you are transferring from a cash ISA which has more than £1,200, then the excess needs to be moved into a non-ISA account or a stocks and shares ISA.
However, you can transfer a Help to Buy ISA to another Help to Buy ISA without this restriction.
You can open a new Help to Buy ISA up until 30th November 2019.
If you have opened a Help to Buy ISA before this date you can continue saving into the account.
You have to claim your bonus by 1st December, 2030 at the latest, otherwise you will lose it.
How much bonus can you get?
The bonus you get will depend on the amount of money you have in your Help to Buy ISA when you apply for your mortgage.
The minimum bonus is £400 and the maximum is £3,000 per person. This means that you would need to save £1,600 to get the minimum bonus and £12,000 to qualify for the maximum bonus.
|Help to Buy savings||Government bonus||Total paid towards mortgage|
** Maximum savings balance to qualify for the highest amount of bonus.
The bonus is only payable if you are buying a property in the UK worth up to £250,000 outside of London, or up to £450,000 within London.
Who gets the bonus?
The bonus is paid to the person who opens the ISA. If you and a partner both save into separate Help to Buy ISAs and then apply for a mortgage together, you could earn a bonus of £3,000 each (a combined amount up to £6,000).
Your bonus will need to be processed by a solicitor or conveyancer as part of your mortgage application. This could cost you up to £50 plus VAT.
If you decide to close the account or use the funds for another purpose, the bonus will not be payable.
What do you need to do?
When you apply for your mortgage, you will need to:
Ask for a closing letter when you withdraw all of your Help to Buy ISA money. This will confirm your Help to Buy ISA balance and the bonus you qualify for.
Take the letter to your solicitor or conveyancer, who will already be dealing with the legal side of your mortgage application. They will process your bonus for you.
You will never see the bonus added to your savings account, instead it will be paid towards your mortgage when you complete on your property purchase.
As long as your name is on the title deeds to the property, you will qualify for the government bonus, whether you buy with someone who is a first time buyer or not.
Will a Help to buy ISA pay you interest?
Some providers offer a better rate is you have an existing account with them.
Yes, every bank and building society pays interest on each of their Help to Buy ISAs.
Make sure you compare rates from as many providers as possible to get the best account.
Will it use up your annual ISA allowance?
Yes, normal ISA rules and limits apply to a Help to Buy ISA.
The Help to Buy ISA will only let you pay in a maximum of £200 each month (plus an initial £1,000 payment); and because you can only pay into one cash ISA in a single tax year you will miss out on using your entire tax free ISA allowance.
Although most providers only let you pay into one ISA in a single tax year, there are a few providers making an exception to this rule. They include:
Nationwide Building Society
Newcastle Building Society
You can re-open your Help to Buy ISA after your solicitor or conveyancer gives you a purchase failure notification letter.
This notification lets you reinvest your ISA back into a Help to Buy ISA, including the bonus you had already built up. Alternatively, you could reinvest the money into a normal ISA without it affecting your ISA allowance, but you would lose the bonus.
How do you apply?
You need to choose which Help to Buy ISA to open first. Here is a list of all Help to Buy ISAs available online to get you started.
Depending on the provider, you can either open the account online or in a branch.
When you apply, you will be asked for the following:
Your details, including your name, address and date of birth
National Insurance number
Money: up to £1,200 to open the account
You will need to sign a first time buyer declaration, which confirms you wish to use your savings towards the purchase of your first property and if you use the savings for any other purpose you will not qualify for a bonus.
Can you use a Help to Buy ISA for a property you want to rent out?
No, the Help to Buy ISA is only available to people looking to buy a property they will live in, and not as a property investment opportunity.
Do you need to prove you are saving for a house?
No, however you will only get the government bonus if you end up using the money in your Help to Buy ISA to buy a property.
What are the alternatives?
From April 2017, you will be able to save into a new savings account called the Lifetime ISA.
The lifetime ISA will let you pay in up to £4,000 a year, and if the funds are used for a house purchase, you will qualify for a 25% bonus (up to £1,000 a year) from the government.
This is not the only saving option available for first time buyers. Try reading our useful guides on the following property buying support schemes also available: