We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies as per our policy which also explains how to change your preferences.

Help to Buy Isas explained

Discover how a Help to Buy Isa could not only help you save towards buying your first home, but earn you free cash from the government too.

In this article
What is a Help to Buy Isa? Video: Help to Buy Isas explained How much can I pay into a Help to Buy Isa? Who can open a Help to Buy Isa? Find a Help to Buy Isa provider How does the bonus get paid?
Paying an exchange deposit What if the sale falls through? Is there anything else I should know? Frequently asked questions Help to Buy Isa vs lifetime Isa Get expert advice on saving for a mortgage

What is a Help to Buy Isa?

Help to Buy Isas are savings accounts which allow first-time buyers to save for a mortgage deposit and then claim a government bonus when they buy their first home.

As with other Isas, any savings deposited in a Help to Buy Isa won't be taxed.

For every £200 you save, the government will pay you a £50 bonus towards the purchase price of a property. This means the government will effectively give you a 25% top-up on savings of up to £12,000, so you could earn a maximum tax-free bonus of £3,000.

Saving for your first mortgage?

Call Which? Mortgage Advisers for expert guidance through every step of the mortgage process.

Arrange a chat
We’re closed. Open Wednesday from 8am
Your home may be repossessed if you do not keep up repayments on your mortgage

Video: Help to Buy Isas explained

How much can I pay into a Help to Buy Isa?

You can pay £200 per calendar month into your Isa. When you first open the account, you're allowed to make an additional contribution of £1,000, meaning you can save £1,200 in the first month.

You can withdraw money if you need to, but your deposit allowance won't change. This means that if you contribute £200 at the start of the month and then withdraw it (or some of it), you won't be able to pay anything else in until the next calendar month.

As well as the government contribution, cash in a Help to Buy Isa will earn interest from the bank in the same way as it would in any other Isa.

This interest will count towards the balance the government bonus is based on.

Help to Buy Isas will only be available until 30 November 2019. After this date, existing account holders will be able to keep saving (and qualify for the bonus) but no new accounts can be opened.

Who can open a Help to Buy Isa?

Any UK resident can open to a Help to Buy Isa - but to qualify for the bonus, you need to:

  • Use the money to buy your first home; and
  • Buy a home costing a maximum of £250,000, or £450,000 in London.

Unlike Help to Buy equity loans, the Help to Buy Isa isn't limited to those buying new-build homes.

The government bonus will only be paid when you buy a property, though, so you won’t get the 25% top-up if you use the money for something else.

If you're saving up to buy a house with another person, you can both open separate Help to Buy Isas, meaning you could potentially get £6,000 extra from the government.

If the person you're buying with is not a first-time buyer, you can open an account and will still qualify for the government bonus on your part of the deposit, but they won't be able to do so for their share.

Help to Buy Isa account holders can take out any kind of residential mortgage (but not a buy-to-let mortgage) and you don't have to get your mortgage from the bank you hold your Isa with.

Find a Help to Buy Isa provider

You can compare Help to Buy Isas using Which? Money Compare; below is a list of all of the banks and building societies currently offering Help to Buy Isas on a national level:

It's also worth speaking to your local building society, as some offer Help to Buy Isas just for local residents and existing customers. Providers include:

Compare Help to Buy Isas with Which? Money Compare.

How does the bonus get paid?

If you've saved up for your mortgage deposit using a Help to Buy Isa and are ready to buy a property, whatever you do, don't just withdraw the money - there's a process you need to follow in order to claim your bonus:

Step 1: Tell the bank that you're ready to buy and would like to close the account. You'll then receive a closing letter from the Isa manager.

Step 2: Give the closing letter to your property solicitor or conveyancer. They will use the letter to apply for your government bonus.

Step 3: The bonus will be transferred to your solicitor.

Step 4: Your solicitor will complete the purchase of your home using the full bonus amount in addition to your deposit. 

The bonus will be calculated based on the total amount of money in your Help to Buy Isa at the time of closing, including any interest you've earned from the bank.

Not all of your deposit needs to be held in your Help to Buy Isa, just the amount that you want to be taken into account when the bonus is calculated.

You can only use your Help to Buy Isa bonus for the purchase of the property itself, not other costs such as conveyancing fees. The bonus is paid on completion so can't be put towards the exchange deposit (see below). 

Paying an exchange deposit

You'll probably have to pay an exchange deposit of 10% when you exchange contracts with the seller (the point at which you legally commit to buying the property). 

You won't be able to put the government bonus towards this, as the bonus is only paid on completion.

If you're taking out a 95% or 90% mortgage and need the bonus as part of your deposit, tell your conveyancer as early on in the process as possible. They should usually be able to negotiate a lower exchange deposit for you.

What if the sale falls through?

If your home purchase doesn't go through after the solicitor has received your government bonus, you can reopen a Help to Buy Isa.

You'll need to ask your solicitor for a 'purchase failure notification' and show it to a bank or building society, who will open an account for you.

In this situation, you'll be able to deposit the full amount you've saved as a lump sum – so if you'd saved £12,000, you can put it all into the Help to Buy Isa at once.

Is there anything else I should know?

For anyone saving up for a mortgage deposit, a Help to Buy Isa is a very attractive option.

However, there are some restrictions:

After the first month, when you can deposit £1,200, you can only save up to £200 a month into a Help to Buy Isa, which works out at £2,400 a year. This means that it would take more than four-and-a-half years of saving into a Help to Buy Isa to benefit from the maximum £3,000 government bonus.

The minimum bonus payment is £400, so you will need to save at least £1,600 in a Help to Buy Isa to qualify for a government top-up.

Help to Buy Isas can only be held by people aged 16 or over, so if you want to save money for your child, a Help to Buy Isa will only work if your child is 16 or above and they open it in their own name (you can then pay into the account).

You can only have one Help to Buy Isa open at any one time (unlike normal cash Isas) but you can transfer between different providers to get the best interest rates.

Help to Buy Isas will only be available to new savers until November 2019, after which point new savers may want to open a lifetime Isa instead (see below for the differences between the two account types).

Frequently asked questions

  • When do I need to claim my bonus by? 1 December 2030
  • Can the bonus be used on a shared ownership property? Yes
  • Can the bonus be used for self-build? No
  • Can the bonus be used for stamp duty? No
  • If I own a commercial property (but have never owned a residential one) can I get a Help to Buy Isa bonus? Yes
  • Can I make multiple deposits in the same month? Usually, as long as they're cumulatively below £200, but this depends on your provider's terms.

Help to Buy Isa vs lifetime Isa

The lifetime Isa, launched in April 2017, is designed to help people under 40 buy their first home or save for retirement. Like the Help to Buy Isa, it offers a government bonus on savings.

It is possible to open a Help to Buy Isa and lifetime Isa at the same time - but you can only get the government bonus on one of them when buying a home.

The table below outlines the main differences between the different accounts so you can decide which is the right choice for you.

  Help to Buy Isa Lifetime Isa
How much can
I pay in each year?
A maximum of £3,400 in year one 
and £2,400 each year after that.
Up to £4,000.
Can you deposit
a lump sum?
No, you’re capped at depositing
£200 a month, except in the first
month when you can deposit an
extra £1,000.
Yes, but no more than £4,000.
What is the
maximum bonus
I could receive?
£3,000 if you save the maximum
amount of £12,000.
£32,000 if you save the maximum
amount of £128,000 over 32 years
between the ages of 18 and 50.
When is the
bonus paid?
When you buy a home, upon
completion. The bonus is usually
paid to your conveyancer.
Monthly.
What’s the
maximum
property price?
£250,000 in most areas of the UK;
£450,000 in London.
£450,000 anywhere in the UK.
When can it
be used to
buy a home?
Once you've saved at least
£1,600. This can be done in three
months if the maximum deposits
are made.
You have to have had the
lifetime Isa for at least a year.
Who can open it? Anyone aged 16 or over who has 
never owned a property before.
Anyone aged 18-39 – but if you
want to put the deposit towards
a property, rather than accessing
it in retirement, you can't have
owned a home before.
What kind of Isa
is it?
Help to Buy Isas are only available
as cash Isas.
Lifetime Isas are available as both
cash and stocks & shares Isas.
How many
providers offer
this Isa?
There are 21 providers listed on the
government's Help to Buy website –
but it may be worth checking with
your local building society, as some
offer Help to Buy Isas to local
residents and existing customers.
There are currently 13 lifetime
Isa providers. Three of these 
offer cash Isas and eight offer
stocks & shares Isas. One is only
for people associated with the 
Met police and another is only
accessible to financial advisers.
Are there fees? No. There are no fees with a cash
lifetime Isa, but there are fees
with stocks & shares accounts.
Fees vary between providers.
Can I withdraw
money if I’m
not buying
a house?
You can withdraw the money at
any time, but if it’s not used to
buy your first home you won’t
receive the bonus.
Yes, but unless you've been 
diagnosed with a terminal
illness or are aged 60 or above,
you'll have to pay a 25% 
withdrawal penalty.
How long will it
be available for?
New accounts are available until
2019, at which point Help to Buy
Isas are being withdrawn from
the market. Accounts that have 
already been opened will be 
unaffected.
There is currently no end date.
Can I transfer
this Isa?
You can transfer to another
Help to Buy Isa. You can also
transfer to a lifetime Isa, but you
can only use the bonus from one
account to put towards buying
a property.
Some lifetime Isa providers will
accept transfers from a previous
lifetime Isa account, but not all.
If you transfer to a different type
of Isa, you’ll be charged the 25% 
withdrawal penalty.
Can I open more
than one?
No. You can open more than one
lifetime Isa, but you can only
open and pay into one each 
tax year.

Find out more: are lifetime Isas any good? Which? investigates

Get expert advice on saving for a mortgage

Saving for a deposit can be a huge challenge, and understanding how mortgages work and how to find the best deal is even trickier. 

Which? Mortgage Advisers is an impartial service that can help with any question you have, no matter what stage you're at. Call them for a free chat on 0800 197 8461 or fill out the form below and they'll call you back.

If you'd like to talk to an expert adviser about your mortgage options, complete your details and Which? Mortgage Advisers will give you a free call back.

Request a FREE call back
  • Completely impartial advisers who don't work on commission
  • We'll search the whole of the market including direct deals
  • Free initial consultation - a fee is only payable if you decide to apply for a mortgage
Submit request When you complete this form your details are sent securely to Which? Mortgage Advisers. We will only contact you for your free consultation. Your home may be repossessed if you do not keep up repayments on your mortgage.

Correct as of date of publication.


 

The information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of the provider before committing to any financial products.

LISTENING TO THE RIGHT MORTGAGE ADVICE?

Which? Mortgage Advisers listen carefully to what you need, then search thousands of mortgages to choose the No.1 for you, even if you can only go direct.

Calls are free from mobiles and landlines

0292 267 0302
We’re closed. Open Wednesday from 8am
Arrange a call back
Your home may be repossessed if you do not keep up your mortgage repayments
×