Just as everyone is looking towards the Black Friday Weekend, it is easy to forget that The Help to Buy ISA is closing to new accounts at midnight on 30th November 2019. You can start a Help to Buy ISA for an initial deposit as little as a pound! So if you are a First Time Buyer and thinking of purchasing a new home get and open a new account before the deadline.
If you have already opened a Help to Buy ISA or are going to do so before 30 November 2019 you will be able to continue saving into your account until November 2029.
How does it work?
If you are saving to buy your first home, save money into a Help to Buy ISA and the Government will boost your savings by 25%! So for every £200 you save, receive a government bonus of £50. The maximum bonus you can receive is £3,000 in which you would need to save £12,000. You can start with a deposit of up to a maximum of £1,200 and then save up to a maximum of £200 a month thereafter. The minimum government bonus is £400, meaning that you need to have saved at least £1,600 before you can claim your bonus. This can be achieved in just 3 months using the maximum deposits. The bonus is available to each first time buyer and not each household. This means that if you are planning to buy with your partner you could each claim up to the maximum £3,000 bonus. The Help to Buy ISA is available from a range of bank, building societies and credit unions. For an exhaustive list please visit: https://www.helptobuy.gov.uk/help-to-buy-isa/providers-in-the-scheme/
Who is eligible for a Help to Buy ISA?
To qualify for a Help to Buy ISA you must:
- Be 16 or over
- Have a valid National Insurance number
- Be a UK resident
- Be a first time buyer, and not own a property anywhere in the world
- Not have another active cash ISA in the same tax year
To qualify for the Government bonus, the property you are buying must:
- Be in the UK
- Have a purchase price of up to £250,000 (or up to £450,000 in London)
- Be the only home you will own
- Be where you intend on living
- Be purchased with a mortgage
Where we come in?
As your acting Solicitor or Conveyancer in your first purchase we apply for your government bonus between exchange of contracts and completion. Once we receive the government bonus, it will be added to the money you are putting towards your first home.
Please remember! It is a common misconception that the bonus is used towards the deposit due on exchange of contracts. The bonus must be included with the funds consolidated at the completion of the Property transaction and cannot be used towards the deposit, to pay for Solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.
Lifetime ISAs versus Help to Buy ISAs
The Lifetime ISA launched on 6th April 2017 and is essentially replacing the Help to Buy ISA. The LISA also gives a 25% bonus on top of what you save and can be used to help you buy your first home or to save for retirement. You can have a Help to Buy ISA and a Lifetime ISA however; you can only use the bonus from one of them towards buying a home. The table below summaries the main points to each ISA to help you choose:
| Lifetime ISA | Help to Buy ISA | |
| Max Contribution? | £4,000 a year | £2,400 a year (£3,400 in year one) |
| Lump Sums? | Yes | No, need to save monthly |
| Max Bonus? | £33,000 (assumes max contribution every year from age 18-49 | £3,000 |
| When’s the bonus paid? | Monthly | On completion when you buy a home |
| Investment option too? | Yes, via stocks and shares LISAs | No. Cash savings only |
| Max property price? | £450,000 | £250,000 (£450,000 in London) |
| How quickly can you use it? | After the LISAs been open 12 months | Once you have saved £1,600 (can be done in 3 months)
|
| Who can open it? | Anyone aged 18-39 | Any first time buyer aged 16+ |
| What can it be used for? | Exchange and completion deposit | Just the completion deposit |
| Can I withdraw money if not buying a home? | Yes, at age 60+, if earlier you will not get a bonus and will pay a penalty | Yes, at anytime you just don’t get the bonus |
Hopefully this explains everything but if not, in summary:
- If you’ll DEFINITELY buy a home, for less than the LISA maximum of £450,000, aged between 18-39, and you don’t want to buy within a year, go for the Lifetime ISA, as you will get a bigger bonus!
- If you are looking to buy quickly or you’re not 100% sure you’ll buy at all then it’s safer to get a Help to BUY ISA.
Useful Links:
Help to BUY ISA calculator – https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/
Martin Lewis tips on Help to Buy ISA – https://www.moneysavingexpert.com/savings/help-to-buy-ISA/
