Awareness of the Help to Buy ISA is low...

...which is sad says property journalist Sharon Dale.

Awareness of the Help to Buy ISA is low, which is sad as it offers a considerable amount of “free money” for first-time buyers saving for a deposit. Even sadder is that this government scheme is coming to an end in November 2019 so now is the time to think about taking advantage of it.

If you are saving to buy your first home and put your money into an Help to Buy ISA, the government will add another 25% to it. You can deposit up to £1,200 in the first month and up to £200 a month after that. So for every £200 monthly deposit you receive a cash bonus of £50. The maximum government bonus you can receive is £3,000 and you need to have saved at least £1,600 in the ISA before becoming eligible for this top up.

If you are purchasing a home with a sibling, partner or friend, they can also open a Help to Buy ISA - providing they are a first-time buyer. If you both save the maximum amount, then you can get a bonus of up to £6,000. It is incredibly generous and on top of that you’ll also get ISA interest of up to approx. 2.5% from the bank/building society.

You can also use the Help to Buy ISA with other government schemes such as the popular Help to Buy equity loan. This sees the government lend you up to 20% of the cost of buying a newly-built home so you’ll only need a 5% cash deposit and a 75% mortgage.

It can also be used as a deposit for a Help to Buy Shared Ownership home.

To qualify for the Help to Buy ISA bonus, your first home must be bought using a mortgage and must have a purchase price of up to £250,000 or up to £450,000 if you are buying in London. It also has to be your main home, so you can’t use this scheme for buy-to-let.

You can open a Help to Buy ISA any time before the November 30 2019 deadline and continue to receive the government bonus for up to ten years. The account will close for contributions on November 30 2029 and you must claim your bonus by December 1 2030.

If the idea of locking away savings scares you, don’t worry. You can withdraw them at anytime, you just won’t get the bonus money. If you know any first-time buyers then check if they know about this scheme as it’s amazing how many are ignorant of it. 

I’ve advised three people over the last year to save into one and none of them had heard of the scheme before.
If you aren’t quite ready to save for a home yet and can’t open a Help to Buy ISA before next November’s deadline, there is an alternative. It even more generous but there are more strings attached.

The Lifetime ISA, - LISA - allows you to save up to £4,000 a year and the government will give you a 25% bonus on those contributions, so up to £1,000 per year. This is a better deal than the Help to Buy Isa, which has a £2,400 annual savings limit and an annual £600 maximum bonus. Plus, savings can be deposited at any time in a LISA with no monthly cap.

If you start saving at 18 and pay in the maximum £4,000 a year until the age of 50, you could earn a whopping £33,000 bonus. LISAs can also be used as a deposit on more expensive properties with a price cap of £450,000.
However, a LISA can be only be used for a deposit on a house or withdrawn at the age of 50, otherwise there is a 25% withdrawal charge, which means you could get back less than you paid in.

There’s also an age limit. LISAs are only available to those aged between 18 and 39. Another thing to bear in mind is that you must have the LISA for at least a year before you redeem the bonus.


Publish date: 11/10/2018

Publisher: New Home Finder