Should I Open a Help-To-Buy ISA?

As the deadline draws nearer time is running out if you haven’t already taken advantage of the government’s offer of free money towards buying your first home.

The help-to-buy Isa – with which the government will give you up to £3,000 with only some strings attached – closes to new savers on 30 November. You can put in as little as £1 into the ISA before that date and then continue tucking money away for another 10 years.

What is the help-to-buy Isa?

It was launched at the end of 2015, and the accounts are available from both banks and building societies. When saving up to buy your first home you can put money into a help-to-buy Isa, the government will boost your savings by 25%. So for every £200 saved, first-time buyers can receive a bonus of £50.

If you or your children are over 16 and have never owned a home but plan on wanting one in the future, you may want to consider opening a help-to-buy ISA before the end date. You can open an account with as little as £1, and don’t have to pay in every month.

You can save up to £200 a month, although to kickstart your account you can deposit a lump sum of up to £1,200. The minimum government bonus is £400, which means you must have saved at least £1,600 in your ISA before you can claim your bonus. There is a maximum government bonus of £3,000, to receive this you need to have saved £12,000. 

Who’s eligible?

To qualify, you must be 16 or over and be a first-time buyer,  defined as someone who doesn’t own, and has never owned, a home anywhere in the UK or the world. If you have paid into a cash Isa this tax year, you will have to transfer the money over. A help-to-buy ISA has to be opened by the individual themselves.

Can I withdraw money from my help-to-buy Isa?

Yes, you can take out your money at any time.

Who offers these Isas?

Lots of banks and building societies. Top of financial information firm Defaqto’s table is Barclays, which is currently offering 2.58% interest on an account that can be opened with £1. Providers currently paying 2.5% include Nationwide, NatWest and Virgin Money, it adds.

Do I have to save £200 every month? No, it is up to you how much you contribute to the ISA each month however the maximum input is £200. You cannot roll over your amount either, for example, if you didn’t save any money during January and February, this doesn’t mean you are allowed to save £600 in March.

What happens after 30 November?

The scheme will no longer be available to new savers from the 30th November 2020. If you do open a help-to-buy ISA before this period you can keep saving into it until November 2029, when accounts will close to additional contributions. You must claim your bonus by 1st December 2030.

Can I take advantage of the lifetime Isa too?

Yes, you can save into both schemes if you meet the eligibility criteria – but you will only be able to use the bonus from one to buy a house. The lifetime Isa lets you save for either a property or retirement. The money invested can be withdrawn after age 60, or earlier if it is being used to buy a first home worth up to £450,000 in the UK. There is a penalty if you withdraw money for any reason other than buying your first home, reaching 60 or if you are terminally ill.

So how does it work with the bonus money?

When you are close to buying the property, you will need to instruct your solicitor or conveyancer to apply for it, and this cash will then be added to the money you are putting towards your first home. You only be allowed the money once everything is complete. he 

If you are planning to open a help-to-buy ISA or any other savings account and would like further advice, get in touch with us today.