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What is the Help to Buy ISA?

One of the government schemes to help people save for a deposit was the Help to Buy ISA. This ISA was designed for First Time Buyers looking to save towards buying their first home.

What is the Help to Buy ISA?

Announced back in March 2015, the Help to Buy (HTB) ISA is a special savings account that offered First Time Buyers over 16 the opportunity to save over £3,000 towards their first home.

How does HTB ISA work?

A Help to Buy ISA is limited to one person. You can save a maximum of £200 a month. The account can hold a maximum of £12,000, so when you come to buy a home you could receive a government top up of up to £3,000. 

If you are part of a couple and both First Time Buyers, you are able to have an account each.  By both contributing the maximum of £200 a month you could potentially claim up to £6,000 from the government towards a mortgage deposit.

You'd need to save at least £1,600 in your Help to Buy ISA before you receiving the minimum £400 government bonus. 

To be eligible for the Help to Buy ISA scheme, you had to:

  • Be a UK resident and over 16 years of age.
  • Be a First Time Buyer purchasing a UK property.
  • Not purchase a property for the buy-to-let market.
  • Open an ISA account between 1st December 2015 and 30th November 2019.
  • Ensure the bonus is claimed through the purchase of a house by 1st December 2030.

The bonus is only available on home or flat purchases of up to £250,000. If you are buying in London, the property can be valued up to £450,000. 

Once you are in the process of buying your first home or flat the government bonus can be applied for by your solicitor or conveyancer upon completion.

Remember that because this is a cash ISA, that means you cannot invest money into another cash ISA within the same tax year, so it’s important to think about how this might affect you if you already have an existing ISA. 

Can I still open a HTB ISA?

Unfortunately for those wishing to take advantage of the Help to Buy ISA to buy their first home, they are no longer available to new applicants. The final deadline for opening this ISA was 30th November 2019. There are other options available though.

What can I use instead of a HTB ISA?

The HTB ISA was not the only government ISA scheme designed to help First Time Buyers purchase a property. The Lifetime ISA is also available and is currently still open to new applicants.

The Lifetime ISA, much like the HTB, is an account used to save for your first home, with a 25% bonus added by the government onto whatever is deposited into it. The Lifetime ISA can also be used to save for a retirement nest egg.

It has the added advantage of being able to access the funds before completion, so the savings and bonus can be used as your deposit, unlike the HTB ISA.

If you are looking for a scheme to help you save for your first home, find out more about the Lifetime ISA.

If you do have a HTB ISA open, some people recommend that you transfer funds from the HTB ISA into a new Lifetime ISA. However, there are a number of key differences between the two accounts that may affect your decision to do so.

Find out more about transferring from a Help to Buy ISA to a Lifetime ISA.

Can I still use my HTB ISA?

YES! Even though you can no longer open a HTB ISA, if you  opened one before the deadline, it will still work as it did before. The deadline for claiming your bonus on a new home is 2030.

Just before exchanging on your property, you will need to inform your Help to Buy ISA provider that you will be closing your account. It is important that you do not withdraw all of your money as you will need your Help to Buy ISA provider to produce a closing letter for you. If you do not have a closing letter you will not be eligible for the ISA bonus. The reason you cannot apply for your bonus sooner is that if helps avoid any issues that may arise if your property purchase fell through at an earlier stage.

You will need to present the closing letter to your solicitor or conveyancer who will apply for the ISA bonus on your behalf through an online portal. A solicitor or conveyancer will charge up to £50 plus VAT for this service.

Bear in mind, you will not be able to use the bonus as part of your exchange deposit - the money should be available before completion to go towards your property payment, but will not be available as part of the deposit, as you cannot access it before you exchange. You need to ensure you claim your bonus within 12 months of closing the account and before your completion date.

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