Date Published 30 September 2019
The Help to Buy ISA scheme is a government scheme designed to help you save for a mortgage deposit to buy your first home. To qualify for this you must be a first time buyer and not own any other property. Your savings are tax free like all other ISA's but the Help to Buy ISA gives you the bonus of being able to claim government contributions. The government will top up any contributions you make by 25% (up to the contribution limit of £12,000). Basically for every £200 you save in your ISA the government will contribute £50. You can earn a maximum amount of £3000.
The minimum amount you need to save to get a bonus is £1600 which would give you a £400 bonus. You can start your ISA with an initial deposit of up to £1000 which also qualifies for the 25% boost from the government. Another plus is that the Help to Buy ISA is available to each first-time buyer individually so if you want to purchase a property with your partner and they are also a first-time buyer you'll be able to jointly claim £6000 towards your mortgage deposit.
You should instruct your solicitor to apply for your bonus once you have an offer accepted. Don't wait for completion as this would be too late. Once your solicitor has your bonus it can be added to the money you're putting towards your home.
When calculating your mortgage your lender will require evidence of the funds you have available and these funds do include what is saved in your Help to Buy ISA. The lender will then include the amount of bonus you've accrued when working out your mortgage loan amount.
So who qualifies?
• You must be a first-time buyer.
• You must be aged 16 or over.
• You can use it to buy any home worth up to £250,000 (or up to £450,000 in London).
• You can use a Help to Buy ISA with any mortgage. You're not restricted to a Help to Buy mortgage.
• You can't use a Help to Buy ISA on a property you intend to let out.
• You can't use a Help to Buy ISA on an overseas property.
• You can't have more than one Help to Buy ISA.
• You can't open a Help to Buy ISA & a normal cash ISA in the same tax year.
Once your savings have reached the minimum amount of £1600 you can claim your government bonus at any time. If you're planning to qualify for the maximum bonus of £3000 it will take around 4 ½ years.
Help to Buy ISAs are available until 30 November 2019. They won't be available to new savers after this date, but if you opened your Help to Buy ISA before then you can keep saving into your account. You must claim your bonus by 1 December 2030.