Help to Buy ISAs Explained
On December 1st, the government unleashed the Help to Buy Isa scheme into the public domain. You’ve likely come to this page in the hope that it can all be explained to you, how will it benefit you and is it worth it; it’s completely understandable to be confused, I was at first but it’s quite straight forward when you break it down. So what’s all of the fuss about?
What is it?
A Help to Buy ISA is essentially the government giving you free money. Sounds great, doesn’t it?
The scheme offers tax free bonuses for first-time buyers saving for a deposit on their new home. By saving a maximum £200 per month, you will receive a bonus £50 up until your savings total £12,000, netting a £3000 bonus.
Help to Buy Isas are classed as savings accounts, so there is absolutely no risk of your money ending up where it shouldn’t be.
How does it work?
When you come to use the money you’ve saved within your Isa, the government will add an additional 25% bonus to whatever is in there, with a minimum bonus of £400; in other words, you need to save at least £1600 before you can receive the bonus. You won’t see this money in your account as it’ll be added by your solicitor when you’re actually paying for your deposit, but it’s definitely yours to enjoy.
Do I have to pay £200 a month, every month?
Nope, how much you save every month is entirely up to you. You don’t have to put the full £200 every month and even if you do, it can be done through ten different payments of £20 if you like, as long as it equates the £200 within that calendar month, you’ll receive the full bonus.
You can save £100 a month if you’d prefer, but your bonus for that month will only be £25, so it’s your choice how you do it.
Those that want to get off to a flying start can open an Isa with a one-off lump payment of £1000 on top of the monthly maximum of £200.
How long do I have to get involved?
After November 30th 2019, you will no longer be able to open a new Help to Buy Isa. However, anyone that began saving before then will have until December 1st 2030 to claim their bonus, so that’s ten years of saving if you need it. November 29th 2019 will be interesting, won’t it?
How much does the property I’m buying have to cost?
You have to be purchasing a house under £250,000 outside of London, or £450,000 in London, although this is not limited to certain types of builds like other government schemes. Any type of property works as long as it falls under the specified house price.
Can my partner open one as well?
If you and your partner both want open a Help to Buy Isa, you are both entitled to the same benefits of a potential £3000 maximum bonus each. Yes, that’s £6000 towards your home! Bare in mind, if one of you has already owned a house before, only the first time buyer can benefit from the Isa.
Will the bonus consider interest?
It will indeed. Whatever is in your account when it is closed, the bonus will be applied to the amount sat in your account, this includes interest.
My 9-year-old brother wants to get into property, can he open one?
Unfortunately, Timmy will just miss out by a few years. To open a Help to Buy Isa, you must be a UK resident aged 16 or over buying their first property. You’ll have to tell him to look out for any future schemes.
What’s the catch?
There’s no catch as such, but if you currently have a cash Isa of your own, the Help to Buy Isa is actually part of the same category.
As you may already know, you can only open one cash Isa per tax year, so anyone that opens or tops-up an existing cash Isa now, will be not be eligible to open the new Help to Buy Isa until 6th April next year.
It’s also worth noting that you cannot open a second Help to Buy Isa, unlike other cash Isas, once you already have one, but at least you’ll be able to transfer it to a different bank or building society if you want to.
Hopefully I’ve been able to clear up some of the confusion surrounding Help to Buy Isas. This really is a scheme worth opening, even if you it’s just to get the minimum £400 bonus, it’s better than nothing.
Good luck and happy house hunting!
Written by Chris Johnson