Help to Buy: ISA
Help to Buy: ISAs offer savings help for first time buyers.
The Help to Buy: ISA, is aimed at helping first time buyers to save up enough money for a deposit on their first home. Like all other ISAs, this new scheme is tax free, meaning your savings can go further. But what is this new first time buyer’s initiative, who is eligible for it and when can you get saving?
What is a Help to Buy: ISA
With the Help to Buy ISA scheme, the government will contribute an extra 25% on top of your savings. You can save up to £200 a month, meaning that if you save the maximum amount, you’ll get an extra £50 every month. What’s more, when you first open up the account, you can save an initial deposit of up to £1,000 - so, in the first month, you could save £1,200 on top of which the government will add an extra £300.
The maximum bonus the government will pay is £3,000 (meaning you’ll have paid in £12,000 to your ISA), although you can claim the bonus as soon as you’ve saved £1,600 (which would be a £400 bonus).
Who is eligible for a Help to Buy: ISA?
If you’re a first time buyer, you can open up a Help to Buy: ISA, as long as you’re over the age of 16. There aren’t any restrictions on income, and you can open one even if you’re buying a property with someone who isn’t a first time buyer.
You can’t get a first time buyer ISA if:
- You’re going to rent out the property
- You have previously owned a property, either in the UK or abroad
- You have inherited property
- You’re planning on buying an overseas property
- Have opened up a normal cash ISA in the same year You can’t have a Help to Buy: ISA and a regular cash ISA in the same year - so if you’ve opened up a new cash ISA (or paid into an existing one) since April 6th 2015, you won’t be able to open up a savings account as a first time buyer until the new tax year.
How to get a Help to Buy: ISA
You can open a Help to Buy: ISA with a bank or building society, just like a normal cash ISA. You have a four year window in which to open one - so first time buyers can take advantage of the scheme until autumn 2019. Once you’ve opened an ISA, you can pay into it for as long as you like, and there are no limits on when you can use your bonus.
Help to Buy: ISAs are limited to one per person. Unlike other ISAs where you can open a new one every year, you can only have one Help to Buy: ISA, but you can continue to pay into it every year. And what’s more, if you’re buying with a partner or a group of friends, each person is entitled to open up an account, meaning you could double or triple the bonus you receive from the government towards your deposit.
Help to Buy: ISA explained
We’ve answered the basics above, but you might still have more questions. We’ve answered the most commonly asked questions about the Help to Buy: ISA scheme, explaining everything from how to make the most of the initiative and when you can expect to receive your bonus.
- Where can I get a Help to Buy: ISA?
These ISAs will be available through banks and building societies, and you should go about opening one in the same way you would a regular cash ISA. This means that rates will differ between providers, but also that you’ll earn interest on your savings, just as you would in a normal ISA.
- Can I switch banks?
Just like a regular cash ISA, you can switch providers. So keep an eye out on the rates offered by the other banks and building societies!
- How much bonus can I earn?
You can save a maximum of £200 per month, as well as an initial £1,000 deposit. The maximum bonus you can receive is £3,000. So if you pay in the maximum £1,000 deposit as well as £200 every month until you reach £12,000 you’ll get a bonus of £3,000 - which gives you an overall total of £15,000.
- When will my bonus be paid?
You can claim your bonus at any point after you’ve saved £1,600. If you’ve deposited the maximum of £200 per month, your bonus at this point will be £400.
- How will my bonus be paid?
The bonus will be paid only when you buy your first home, in the form of a voucher which will go to your mortgage lender. So although you’re free to use the Help to Buy ISA as a regular savings account, you won’t benefit from the bonus unless you actually buy a house.
- Will I earn interest on the bonus?
As the bonus will only be paid after you’ve bought your first home, the bonus won’t accrue any interest.
- Can I continue saving after I’ve reached £12,000?
Yes and you’ll continue to earn interest on any amount you pay in, but the maximum bonus you can recieve is £3,000 so you may wish to continue saving in an account which offers a better interest rate.
- Can I use the Help to Buy: ISA to buy any home?
Unlike the Help to Buy scheme, this ISA for first time buyers is not restricted to new build homes - it can be used to buy a home which is either brand new or has already been lived in. However, it is only available on properties which cost up to £450,000 in London and £250,000 anywhere else in the UK.
- If I forget to pay in one month, can I make up for it the next month?
Unfortunately not - the maximum amount you can pay in any one month is £200.
For more information on which Help to Buy: ISAs are available visit MoneySavingExpert.comFor more information and for full terms and conditions
download the Help to Buy: ISA Leaflet.