What is a help-to-buy ISA and what is the best one for first-time buyers?
The Help to Buy ISA gives first time buyers an extra 25 per cent on top of their savings and is available until December 2019
SAVING UP to buy a house can seem like an impossible task for first time buyers
But, a Help to Buy ISA might make it a little bit easier to raise the cash for the mortgage deposit on your first home.
What is a Help to Buy ISA?
The Help to Buy ISA is a government scheme that gives first time buyers a 25 per cent bonus on top of their savings.
So, for every £100 you put into your Help to Buy ISA the government will add £25 on top.
The maximum amount the government will pay out is £3,000, which would mean you would have to put £12,000 in the ISA.
The scheme is available now and you can apply for an ISA until December 2019, after that you can continue to save using the ISA until December 2029.
Unlike a regular cash ISA you are only allowed one Help to Buy ISA per person.
How do I apply for a Help to Buy ISA?
Any UK resident over 16 with a national insurance number who has never owned a property before can apply for a Help to Buy ISA.
You cannot apply to the scheme if you have owned a home outside the UK or inherited a property.
If you have opened a cash ISA account in the same tax year as when you apply for the scheme you will not be able to get a Help to Buy ISA.
You can apply for the help to buy ISA at a range of banks and building societies, the full list is available below:
Where can I apply for a Help to Buy ISA?
Here is the full range of banks providing a Help to Buy ISA
- Aldermore (telephone and online only)
- Bank of Scotland
- Barclays (branch and telephone only)
- Buckinghamshire Building Society (branch and post only)
- Chelsea Building Society (online only)
- Chorley Building Society (branch and post only)
- Clydesdale Bank
- Cumberland Building Society (branch only)
- Darlington Building Society (branch only)
- Halifax
- HSBC
- Lloyds
- Monmouthshire Building Society
- Nationwide (branch and online only)
- NatWest
- Norwich & Peterborough Building Society (branch and post only)
- Penrith Building Society (branch, post and online only)
- Polish Credit Union
- Progressive Building Society (branch and post only)
- Newcastle Building Society
- Nottingham Building Society (branch only)
- Santander
- Tipton & Coseley (branch and post only)
- Ulster Bank
- Vernon Building Society
- Virgin Money (online only)
- Yorkshire Bank
- Yorkshire Building Society (branch and post only)
How does the scheme work?
The Help to buy ISA is available to individuals and is not given out per house you are buying.
You and your partner could both get on the scheme and receive up to £6,000 to help buy a house.
In your first month of starting the scheme you can put up to £1,200 into the ISA.
After that you can only deposit £200 a month in your Help to Buy ISA.
Don't worry if you can't raise that amount of money, you can add as much or as little as you like into the scheme for as long as it lasts.
If you don't pay any money in one month the amount does not roll over to the next month.
For example, depositing nothing in April doesn't mean that your monthly limit for May will be £400.
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What kind of house can I buy with the scheme?
You can use the bonus money on any house that costs under £250,000 with any type or mortgage.
If you want to buy a house in London the bonus money can be used on a house costing under £450,000.
It can be any property, whether that be a new build or an older house, as long as you are going to live in the house and not buy to let.
If you are buying as a couple the bonus is only applied for the full house price not the proportion you are paying for.
So, you could not use the Help to Buy ISA on a £300,000 house that you and your partner are splitting the cost 50/50.
The Help to Buy ISA does not need to be your sole savings and can be combined with other savings, and you are not tied to a mortgage on the house with the same bank that you opened the ISA with.
What can the bonus money from the Help to Buy ISA be used for?
The money from the Help to Buy ISA scheme can only be used for the mortgage deposit.
This is the final deposit that you pay to become the legal owner of the house.
The bonus money from the scheme cannot be used for the 10 per cent initial deposit that makes sure the estate agent wont try and sell the house to anyone else.
The money you put into the ISA can be used for any part of the transaction when buying the house.
How can I use the money I have saved in the ISA?
You need to have at least £1,600 saved in the ISA to be able to withdraw any bonus money.
When you have found the house you are after you need to contact the bank you opened the ISA with to let them know you are going to buy a house.
From here you need to close down the ISA account and transfer the money into different account.
The bank will then give you a letter confirming that the ISA is closed.
Give this letter to the solicitor who is doing the admin work when you buy the house.
The solicitor then gives this letter to the government so that the bonus money that the government owes you isused in the transaction when you buy the house.
This requires a fair amount of admin work from the solicitor so don't be surprised if you get charged around £60 for them sending this letter off.
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