Understanding Help to Buy ISAs

Getting onto the housing market has never been more difficult. That’s especially true in large cities where property prices have risen dramatically over the last couple of decades. First time buyers are often trapped between trying to save for a mortgage and dealing with ever increasing rental levels. Help is at hand in the form of the government’s Help to Buy ISA.

What is the Help to Buy ISA?

It is a scheme introduced by the government which helps first time buyers save for their home. ISAs already come with tax advantages to encourage savings but this product also has government contributions which add more money to the pot.

- Essentially, the government will add 25% to your savings up to a contribution limit of £12,000.

- The maximum you can get is £3,000, taking your total savings up to £15,000.

- You need to have saved £1,600 to qualify for the bonus savings but you also get 25% on depositing your first £1,000 in the ISA.

- You will also earn interest on your ISA though the amount of this will depend on your provider.

There’s more good news if you are buying a property with someone else. The ISA and the bonuses you get are attached to each first-time buyer and not a single property. So, if there are two of you looking to buy a property together and you both save £12,000, you can get a further £6,000 from the government to help with your deposit.

Do I Qualify for a Help to Buy ISA?

There are a few requirements for qualification and some exclusions to be aware of:

- You have to be a first-time buyer and over the age of 16.

- You can use the Help to Buy ISA to purchase a house that is under £450,000 inside London or under £250,000 outside.

- The money you get from the ISA doesn’t restrict the type of mortgage you qualify for.

You can’t, however, use the ISA if you are intending to buy the property and then rent it out or buy a property overseas. If you have already opened a cash ISA this year, you can’t start a Help to Buy ISA until the following year.

How Long Will It Take To Save?

You can only put so much into your Help to Buy ISA each year. You can withdraw your money once you have invested over £1,600 if you have a property to buy. If you are intending to save the full £12,000 to get the maximum government bonus of £3,000, it will take you 4.5 years.

If you are planning to save money through this ISA, you have under a year to get onto the scheme. Help to Buy ISAs will not be available to new savers after the end of November 2019. If you have already joined the scheme, however, you will still be able to save after this date and access the full government bonus.

How Do You Claim the Bonus?

You cannot simply withdraw the money from your ISA and spend it on anything but a property purchase. To claim the bonus, you will need to go through your conveyancing solicitor once you have exchanged contracts on a property but before completion.

You can find out more about the Help to Buy ISA here.


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