You may have heard about the Help to Buy ISA, but do you know how it could work for you?
If you’re a first-time buyer and saving a deposit for your home, this could be a nice wee bonus that lets you get into your new home quicker…
So what do you need to know…
What is a Help to Buy ISA and how much can I save?
Help to Buy ISAs were introduced by the Government in December 2015, as an incentive designed to help first-time buyers save up a deposit for their home. In effect, the Government will top up your savings by 25%. So, for every £200 you save, the government will contribute £50 (up to a maximum of £3,000 on savings of £12,000).
The most you can get from the Government is £3,000, so the maximum amount you can save in a Help to Buy ISA is £12,000. The minimum amount you need to save to qualify is £1,600 (which gives you a £400 bonus).
Even if you’ve already started savings elsewhere, this could still work for you; you can start off your ISA with an initial deposit of up to £1,000 which also qualifies for the 25% boost from the Government.
Help to Buy ISAs are available to each first-time buyer, not each house, so if you’re buying a property with your partner, you’ll be able to get up to £6,000 towards your deposit, as long as you’re both first-time buyers. But don’t worry if you’re not, as long as one of you hasn’t owned a home before, then that individual will still qualify.
Once your savings have reached the minimum amount (£1,600) you can claim your Government bonus at any time. If you want to qualify for the maximum bonus of £3,000 it will take just over four and a half years.
It’s worth noting that you will need to instruct your solicitor or conveyancer to apply for your Government bonus when you’re close to buying your home. Once they receive the Government bonus, it will be added to the money you’re putting towards your first home. (Your solicitor may charge a maximum fee of £50 plus VAT for completing this part of the process for you.)
The interest rates on Help to Buy ISAs will vary and will be set by each provider. There are lots of banks and building societies out there offering these ISAs, so do your research to make sure you get the best rate, but your Government bonus will always stay the same.
You can apply for a Help to Buy ISA before 30 November 2019. They won’t be available to new savers after that date, but if you’ve opened yours before then, you can keep saving into your account. However, you must claim your bonus by 1 December 2030.
So who can qualify for a Help To Buy ISA?
You need to be a first-time buyer
You must be aged 16 or over
You can use it to buy any home worth under £250,000 (or under £450,000 in London).
You can use a Help to Buy ISA with any mortgage; you’re not restricted to a Help to Buy mortgage.
Who doesn’t qualify for a Help to Buy ISA?
You can’t use a Help to Buy ISA if you’re going to rent out the property
You can’t use a Help to Buy ISA on an overseas property
You can’t have more than one Help to Buy ISA
You can’t open a Help to Buy ISA and a normal Cash ISA in the same tax year*
*Some providers will let you save into a cash ISA and a Help to Buy ISA within the same ISA wrapper. However, the standard cash ISA and Help to Buy ISA allowance limits will still apply.
What if I change my mind? Will I lose my savings?
Things change so don’t worry, you can take the money out whenever you want even if you’re not buying a property. If you decide not to buy your first home (or to buy one costing more than the qualifying amount) you don’t lose the money – you just miss out on the bonus. It’ll still be tax-free and you’ll still get the interest you’re due.
So, why wait? The sooner you get started saving, the higher the bonus you’ll earn!