In 2015, the government launched its Help to Buy ISA, with the aim of helping people onto the property ladder by offering a bonus of 25 per cent of the amount you save. However, many people are still unclear about what the scheme is about and how it works, so we’ve answered some of your questions.
How does the Help to Buy ISA work?
Basically, for every £200 you save the government will give you £50, which amounts to an extra 25 per cent of tax-free savings. The most you can get from the government is £3,000, meaning the maximum you can save in the Help to Buy ISA is £12,000. The bonus goes straight to the mortgage lender, so you’ll never actually see it in your account and it doesn’t accrue interest (although your savings will, just as with any regular ISA.) If you don’t buy a home, you don’t get a bonus.
Who is eligible for the Help to Buy ISA?
Any UK resident aged 16 or over who is buying a property for the first time is eligible, and the Help to Buy ISA can be used to buy any UK property, not just new builds. However, you can’t be buying a property to let, and the cost of the home you buy can’t exceed £250,000 (or £450,000 in London.) You can only hold one Help to Buy ISA but the ISA is per person rather than per property. It means that if you were buying a property with a partner, for example, you could each hold a Help to Buy ISA and receive up to £6,000 from the government which could be used for a single property purchase.
When can I get a Help to Buy ISA?
The Help to Buy ISAs became available in December 2015, but you will need to make an initial deposit of £1,000 to open one. You’ll also need to have saved £1,600 before you can claim your bonus, but once you’ve reached that amount you can claim at any time. If you want to claim the maximum amount of £3,000 you would need to save for just over four and a half years. You’ll also need to get a solicitor to apply for the bonus cash for you when you come to buy a home.
How long are Help to Buy ISAs available for?
You must open your Help to Buy ISA by 30 November 2019. After that, they won’t be available to new savers, but if you’ve already opened one you can continue to save. You must claim your bonus by 1 December 2030 though.
Am I guaranteed a great deal?
Not necessarily. Obviously, the amount you receive from the government remains the same no matter who you save with, but the amount paid to you by the ISA itself varies between savings providers. Some are far more generous than others, so make sure you shop around for the best deal.
Update (21/02/19): From April 2021, the rules surrounding the Help to Buy scheme are changing. You can find out more about these changes in our recent article, “How is Help to Buy Changing?“
If you would like to discuss Help to Buy in more detail or talk about how Key Mortgage Advice can assist with your mortgage application, you can find our contact details here.