Help to Buy ISA: How Does it Work?

A Help to Buy ISA is a type of Individual Savings Account that helps first-time buyers save a deposit for their own home. The government adds 25% to each participant’s savings, to a maximum of £3,000 on savings of £12,000. This means for every £200 you save the government will give you a bonus of £50. The special account is available from a selection of building societies, banks and credit unions.

If you haven’t yet signed up for the scheme, you don’t have much time left, as new applicants will no longer be able to register after midnight on 30th November 2019. If you already have a Help to Buy ISA, you can continue paying into it to save money until November 2029.


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What are the benefits?

Opening one of the accounts means the government is boosting your own savings by 25%. The account is available to each individual first-time buyer, not the household. This means if you’re buying a house with your partner, you can each open your own Help to Buy ISA. Then, as a couple, you can receive a total of up to £6,000 between you towards your first new home.

You can save up to £200 per month into the ISA account, but to kick-start it, you can pay in a lump sum of £1,200 in the first month. Before claiming your bonus, you will need to save at least £1,600 in your Help to Buy ISA, as the minimum government contribution is £400.


Are there any T&Cs?

There are a few rules governing the scheme. You must be a first-time buyer aged 16 or over. You can use the ISA to buy any home valued up to £250,000 – or up to £450,000 if you’re in London. On the plus side, you can use your Help to Buy ISA with any mortgage, as it’s not restricted to a Help to Buy mortgage.

You can’t use the ISA if you’re planning to rent out the property and you can’t use it towards a property overseas. As an individual, you can’t pay into more than one Help to Buy ISA. If you open a normal Cash ISA, you can’t open a Help to Buy ISA in the same year.

Set by each individual provider, the interest rate on your Help to Buy ISA will be variable. You can’t earn interest on the government bonus, as you don’t get it until you actually buy the property. When you’re ready to claim your bonus, it’s calculated by combining the money you’ve saved with the interest added since your account opened.


How do you claim the bonus?

Once your savings have reached the minimum total of £1,600, you can claim the government bonus at any time, but if you want to qualify for the maximum government bonus of £3,000, this will take more than four-and-a-half years.

As soon as you’ve saved almost enough money to buy your first home, instruct your conveyancer or solicitor to apply for the bonus. It will then be combined with the money you’re putting towards the purchase of the property.

The bonus can’t be used for the deposit at the exchange of contracts. You can’t use it to pay the solicitor’s fees, the estate agent’s fees, or any other indirect costs. It must be included with the money consolidated when the property transaction is completed.

Hurry if you want to take advantage of the Help to Buy ISA – the clock’s ticking!

Do you have any recent property purchasing stories? Are you a first-time buyer who has signed up for the Help to Buy ISA? Share your encounters with other consumers in the property and home section on Psydro’s unique reviews platform. At this important time, any past experiences that you can share might just take some of the stress out of the whole property buying process for someone else!

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