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Help to Buy ISA

Posted on 10th December, 2015

Help to Buy ISA

The current help to buy system the government has in place is used by many and is a very useful way for first time buyers to buy new build homes. However there is still some criticism surrounding the scheme. The Help to Buy Scheme is brilliant, if you have the initial 5% deposit that is required in the first place, however many people in the UK struggle with accumulating this initial 5%. Those who currently rent cannot afford to save as much and get stuck. George Osborne has therefore introduced a way for first time buyers to get onto the property ladder sooner. The Government has now introduced the new Help to Buy ISA to help boost the economy and property sales making it easier for people to save for the initial deposit.

How does it work?

When using a new Help to Buy ISA the government will boost your savings by 25%, there are however restrictions on this (of course). When opening an account there is no minimum initial deposit, however the maximum deposit is £1,200. There is a minimum saving set at £1,600 before the government will boost your savings (by £400). Once the account has been opened and the initial deposit of up to £1,200 has been paid there is a cap on the amount of and frequency of the deposit of £200 a month. You don’t have to deposit £200 a month, you can pay a reduced sum as long as your monthly deposits do not exceed £200 a month however if you missed a month you cannot build your allowance and would not be able to put an additional £200 in the next month to qualify for the missed bonus. The maximum savings in which the government will pay out on is £12,000 (bonus of £3000 from the government). You can save more than £12,000 however the bonus from the government will not increase.

Are you eligible?

You will be eligible for the Help to Buy ISA if you are 16 years old or over, have a valid national insurance number and are a UK resident. Another restriction however is that you must be a first time buyer and not own another property anywhere in the world. You can also not open a Help to Buy ISA if you already opened an active cash ISA since 5thApril 2015 unless you transfer the money from the said ISA into your Help to Buy ISA (up to £1,200) and transfer any surplus into a stocks and shares ISA or another account. There are other exceptions regarding the ISA explained at http://www.helptobuy.gov.uk/help-to-buy-isa/faq.

Qualifying properties

The Help to Buy ISA can only be used when buying a property that is in the UK and costs up to £250,000 or up to £450,000 if you are buying in London. The property cannot be a second home or a buy to let property; it also cannot be rented out after the purchase. Also the property must be bought alongside a mortgage.

Frequently Asked Questions – Answered

  • You can use your Help to Buy ISA alongside any of the other Help to Buy initiatives as long as the requirements for those schemes are also met.
  • You cannot hold a Help to Buy ISA in joint names – you can however use more than one ISA on the same property if both individuals match the eligibility requirements discussed above. This means that it is possible to save a maximum of £24,000 and receive a full £6,000 boost from the government.
  • You do not need to wait until you have saved the full £12,000 before you can access the Help to Buy ISA – as long as you have over £1,600 in the ISA you will receive the 25% bonus on all of the savings.
  • You can only have one Help to Buy ISA – therefore unlike a normal cash ISA you cannot open a new one every year.
  • You will not be able to open a Help to Buy ISA on behalf of somebody else.
  • Monthly Payments must be made in the calendar month for example if you opened an Account on the 10 December you would have until 31December to pay your initial deposit of up to £1,200 and then within the following calendar months you monthly deposit must be made.
  • As long as your provider allows you should be able to make multiple deposits into the Help to Buy ISA up to the maximum of £1,200 in the initial month and up to £200 every month thereafter.
  • You do not need to deposit £200 a month, you can deposit lower amounts. Also you do not need to deposit money every month – however you cannot miss 2 months and then deposit £600 to make up the difference. A deposit has to be made each month otherwise the opportunity will pass.
  • Any Interest you earn on your Help to Buy ISA will also count towards the bonus; however the government will only ever give you a maximum bonus of £3,000.
  • The bonus will not be paid into the ISA Account, when the purchase of a property has been agreed the solicitor/conveyancer will apply for the bonus directly and will be paid into the solicitor/conveyancers account ready for completion.
  • You will not receive interest on the government bonus.
  • You can withdraw money from the Help to Buy ISA but you will need to wait until the next month before being able to deposit money again.

The Help to Buy ISA will be available for savers to open until 30 November 2019. If you already have a Help to Buy ISA before the 30 November 2019 you be able to continue saving however you will need to apply for your bonus by 1 December 2030.

For more information on the Help to Buy ISA and the governments Help to Buy schemes in general please use the following link http://www.helptobuy.gov.uk/

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