Help to Buy – ISA: All you need to know

From December 1st 2015, a new scheme to help first time buyers with saving for their mortgage is available. It is called a Help to Buy ISA.

What is a Help to Buy ISA?

The Help to Buy ISA is a new ISA that is specifically set up to help savers with mortgages and nothing else, you cannot use it to save for any other reason.

There are other rules attached, but with a huge boost where the government adds 25% of whatever you’ve saved, it really is the best place to put your money if you are a first time buyer.

Read our handy guide for all the information you need about Help to Buy ISAs:

Who is eligible for the Help to Buy ISA?

  • Anyone who is a first time buyer
  • Over 16
  • Has a valid National Insurance number
  • Is a UK resident

You will not qualify if:

  • You have another active cash ISA within the same tax year (if you happened to have opened one this tax year you can still open a Help to Buy – ISA but you’ll need to undertake further qualifying steps).
  • You have any other property anywhere in the world or have ever previously owned or part owned any property.

To be eligible for the government bonus, the property you are thinking of buying must:

  • be situated within the UK
  • be purchased with a mortgage
  • be used as your home and not a second home or buy-to-let
  • not be rented out after you have purchased it
  • cost up to £250,000, or up to £450,000 if you are buying in London

What are the benefits of a Help to Buy ISA?

You can save up to £1,200 in the first month of opening your ISA and then after that £200 each month and the government will add 25% to whatever amount you save. You will need to save at least £1,600 to claim the minimum government bonus of £400 but if you save £12,000 you will get the maximum bonus of £3,000.

The bonus will not be paid into your ISA but once you withdraw your savings your appointed solicitor will pay the bonus towards the mortgage you have applied for.

The ISA’s are individual savings products, but couples who are saving for their first home and are both first time buyers can open separate ones to maximise their bonus, and you can even open one if your partner is not a first-time buyer.

You can only have one Help to Buy ISA, unlike standard cash ISAs where you can open a new one each tax year. You can however add to it each year and you can transfer it between different banks and building societies in order to get the best interest rate.

What if I don’t use it to buy a house?

You can still get your money out but you will not get the government bonus. But it is worth remembering that your savings will be tax free and at a higher interest rate.

Should I get a Help to Buy ISA if I am going to buy a house soon?

It takes in practise, 3 months to get the minimum bonus of £400, this is because in the first month you can pay in up to £1,200, then £200 in the next two months. But as a month is classed as a calender month, realistically you could do this at the end of one month (£1,200 on December 31st, £200 in January and then the last £200 on 1st February).

This means you have taken just 31 days to raise £400. So if you have savings in other accounts it is worth moving them into a Help to Buy to get the bonus.

For more information visit gov.uk/helptobuy

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