The Help to Buy ISA is a savings account that is part of a scheme run by the Government where they will top up your savings by 25% up to a maximum of £3000 to help you raise the deposit required to buy a home.
It was brought into place to help first-time buyers afford to get their foot on the property ladder and is available to first-time buyers ages 16 and over who are buying a property that is less than £250,000 (£450,000 in London).
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What is a Help to Buy ISA?
The Help to Buy ISA is an affordable homeownership scheme where the government will top up your savings by 25% to help you raise money for a deposit to buy your first home. This scheme is only available to first time buyers buying a property that is valued under £250,000 (£450,000 in London) as long as you intend to live in it.
You can receive a maximum bonus of £3000 from the government – this isn’t per household either, so if you’re buying with another person then it’s worth you both opening a Help to Buy ISA. This means that you can both receive the maximum, giving you a potential £6000 towards your deposit (with savings of £24,000).
How do they work?
There’s a huge number of banks and building societies that you can choose between to take out a Help to Buy ISA – you don’t need to use the same bank to take out your mortgage, you still have the freedom to choose your mortgage provider when the time comes.
You’re able to kick start your savings with a deposit of up to £1200 on the first month, after which you have an allowance of £200 per month which you can save. You can take out a Help to Buy ISA with a large number of different banks and building societies. If you are applying with a partner, it’s a good idea for both of you to open one as you’ll both be able to receive the government bonus on your individual savings.
Once you’ve opened the account and set up a direct debit for your chosen amount each month, you can just sit back and watch your savings stack up. You will receive interest on these savings, depending on which bank or building society you decide to open the ISA with. The government bonus will not ever enter this account as you apply for it at the end.
In order to receive a bonus from the government, you will need to have at least £1600 saved – you’ll receive £400 on this. Any savings between £1,600 and £12,000 (after interest) will receive a 25% bonus, and any savings over £12,000 after interest will receive the maximum of £3,000.
Once you’re close to buying your first home, you just need to let your solicitor or conveyancer know that they need to apply for your government bonus. They will charge you no more than £50 +VAT for this. Once they receive the funds, the money will be added to the money that you will put towards your first home. This becomes part of your mortgage deposit.
Am I eligible for a Help to Buy ISA?
You will not be able to open a Help to Buy ISA unless you and the property you are buying meet the eligibility criteria:
- You must be aged 16 and over
- Must have a valid National Insurance number
- You must be a UK resident
- You must be a first-time buyer worldwide – this means you cannot own a home anywhere in the world
- Must not have another active ISA – this is an ISA that you have paid into in the current tax year (between 6th April and 5th March)
The property must be:
- Based in the United Kingdom.
- Priced above £250,000 (£450,000 if the property falls within London. You can check the boroughs on this map)
- The only home you own.
- Purchased with a mortgage – you cannot use a Help to Buy ISA if you’re buying the house outright.
- Where you intend on living – if your situations change then it’s unlikely that they’ll revoke the bonus, but if you never intend to live in the property then you won’t be eligible.
Some great news is that you’re able to use the Help to Buy ISA with Shared Ownership or an equity loan and, as a result, means that getting your foot on the property ladder is more accessible. When using a Help to Buy ISA and shared ownership, the price cap refers to the total price of the property, not the share you are buying. We’ve got a great article on shared ownership here.
What offers are there available on the market for a Help to Buy ISA?
You can open a Help to Buy ISA with the following banks and building societies – we compare the best options available below.
- Bank of Scotland
- Buckinghamshire Building Society
- Chelsea Building Society
- Chorley Building Society
- Clydesdale Bank
- Cumberland Building Society
- Darlington Building Society
- Monmouthshire Building Society
- Penrith Building Society
- Progressive Building Society
- Newcastle Building Society
- Nottingham Building Society
- Tipton & Coseley
- Ulster Bank
- Vernon Building Society
- Virgin Money
- West Bromwich Building Society
- Yorkshire Bank
- Yorkshire Building Society
NatWest currently offers a Help to Buy ISA with an interest rate of 2.5% variable. They also allow you to have a ‘split ISA’ which means that you can also open and save into a cash ISA alongside this account. Both ISAs must be with NatWest, however.
You still have a maximum ISA allowance of £20,000, so between the two you must not save any more than this. If you’re a NatWest customer already and use online banking, then you can sign up for a Help to Buy ISA on online banking. If not, you can visit one of their branches or go to their website natwest.com
Nationwide are offering a Help to Buy ISA with an interest rate of 2.5% variable. They don’t offer a slit ISA, so if you’re hoping to put money into a cash ISA as well, then you’ll need to find one that does. If you’re currently a Nationwide customer, then you can open a Help to Buy ISA from online banking. If you’re not a Nationwide customer, then you can either go to their website at nationwide.co.uk or visit one of their branches.
Barclays offer a Help to Buy ISA with an interest rate of 2.58% – the highest of the three. This rate is variable, so it is subject to change.
If you already bank with Barclays then you can choose to either apply online, over the phone or inside one of their branches. If you’re new to Barclays, then you can apply in one of their branches – take along a proof of ID and your address.
When do I have until to apply for a Help to Buy ISA?
You will no longer be able to apply for a Help to Buy ISA after November 30th 2019. If you have one open already, then you’ll still be able to save into it until November 30th 2029 (for another 10 years). On November 30th 2029 accounts will be closed to additional contributions and you will need to claim your bonus and close your account by December 1st 2030.
If you’d like to read about any other affordable homeownership schemes, then we have articles on both the Help to Buy Equity Loan and Shared Ownership. Make sure you take a look around at the different options available to you and fully research the costs that you will incur.
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