Help to Buy ISA: Explained

The Government has a number of schemes to aid people in buying affordable homes. This includes the Help to Buy ISA which launched in 2015.

The Help to Buy ISA was introduced to help first-time buyers save money, and the Government would boost these savings with a 25% bonus (maximum of £3,000 bonus). Although the Help to Buy ISA is no longer available to new applicants, there are alternative options available.

However, there are a few things to consider when you have a Help to Buy ISA.

What is a Help to Buy ISA?

The benefits of the Help to Buy ISA include earning interest on whatever you save, and that the interest is tax-free. With this ISA you can add up to £200/month into the account which will be used towards your new home, and on top of what you have saved, the state will add a 25% bonus (max of £3,000). However, this bonus is only available when it is used as a cash deposit for your first home.

Does the Help to Buy ISA run out?

Each month you can add up to £200/month to the ISA. You can keep saving until 30tth November 2029, and you’ll have until 1st December 2030 to claim the 25% bonus. You can continue adding money to the ISA, although there is no investment risk with this type of saving account, there is a small risk of the Government changing the rules before 2030.

What will my Help to Buy ISA bonus be?

The state will add a 25% bonus onto whatever is in your ISA when you use it as a cash deposit for your first home, up to a £3,000 bonus. However, you will need at least £1,600 in your ISA to receive the bonus. But if you go over the £3,000 bonus (e.g. if you have more than £12,000 in your ISA), the most you will get as a bonus is £3,000. Although you can continue to use this ISA to save.

Using the Help to Buy ISA to buy a property

The bonus is available on homes priced at £250,000 or less (£450,000 for London), and this isn’t restricted to buying a new build home. The ISA must be used alongside a mortgage in order for you to be eligible to get the bonus.

The Help to Buy ISA can be used along with any residential mortgage (not a buy-to-let), this doesn’t have to be a Help to Buy Equity loan
The property price limit of £250,000 is concrete and doesn’t change if you are using two Help-to-Buy ISAs to buy a property
The ISA can be combined with other savings to make up a deposit
Your Help to Buy ISA provider doesn’t need to be your mortgage lender
Your solicitor will need to apply for the bonus when you’re buying a home
The Help to Buy ISA can be used only for the deposit at completion, not in the home exchange deposit. This ensures that if anyone pulls out, no one will get the deposit if the sale doesn’t go through
If you’re not planning on buying your first home in the next year, it could be worth transferring your Help to Buy ISA to a LISA, as you can save £4,000 a year in a LISA, compared with £2,400 annually after year 1 in a Help to Buy ISA
If you decide not to use your Help to Buy ISA to buy your first home you can withdraw the majority or some of the money, but you won’t get the bonus for the amount you withdraw. The bonus is based on the amount of money in the account when you apply for the bonus