Help to Buy ISA – things you might not know
If you’re saving for your first home you may have heard about the Government’s latest initiative, the Help to Buy ISA. This is effectively a cash ISA where you can save up to £200 a month, but the government will boost your savings by 25% up to a maximum of £3,000 (provided you’ve saved at least £1,600). What’s more, you can open a Help to Buy ISA with a deposit of up to £1,200. This means that over the course of your investment, you could have £15,000 to put towards your first home:
Using your bonus funds
You can only claim your bonus funds when you are buying a home and the money has to go towards the completion of your property. This means you can’t use it to pay your solicitor, estate agent or any other fees or costs associated with buying a home.
Interest you earn
Your government bonus will be calculated based on the amount of money you have in your account when you close it. This includes the money you have put away and any interest you’ve earned on that money.
You can have more than £12,000 in your account, but you'll be limited to a maximum government bonus of £3,000.
Applying for your bonus
When you find your home, your mortgage provider will ask you to hire a solicitor or conveyancer to handle the legal aspects of buying it. When you’re close to finalising your home purchase, you’ll need to ask your bank or building society to close your Help to Buy ISA and they will give you a closing letter.
You will then need to take this letter to your solicitor or conveyancer so that they can apply for your government bonus.
Closing your account
If your home purchase doesn’t go through after your solicitor or conveyancer has received your government bonus, you can re-open a Help to Buy ISA and the same terms will apply. Your solicitor or conveyancer will give you a document (called a purchase failure notification) confirming your home purchase did not complete. If you take this to a bank or building society, they will open an account for you. At this point, you will be able to deposit your money as a lump sum. So, if you closed your Help to Buy ISA with £12,000 in it, you will be able to re- deposit £12,000.
First home, new responsibilities
Owning your own homes brings new responsibilities in terms of paying a mortgage and it’s important to think about things like income protection, which can help to protect the roof over your head if you’re unexpectedly unable to work.
Contains public sector information licensed under the Open Government Licence v3.0.
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