What is a Help to Buy Isa?
Help to Buy Isas aim to give a helping hand to first-time buyers saving up for a mortgage deposit.
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.
Our video explains everything you need to know about Help to Buy Isas.
How do Help to Buy Isas work?
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.
Separately from the government contributions, 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 will 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 meet the following criteria:
- Use the money to buy your first home; and
- Buy a home worth less than £250,000 (or less than £450,000 in London).
Unlike other schemes, this isn't limited to new-build homes.
The government bonus will only be paid when you buy a property, 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 someone else, you can both open a Help to Buy Isa, which means you can jointly earn a bonus of up to £6,000.
If the person you're buying with is not a first-time buyer, you can open an account and will qualify for the government bonus on your own part of the deposit, but they won't be able to do so for their share.
Account holders can take out any kind of residential mortgage (but not a buy-to-let mortgage).
Find a HTB Isa provider
The national banks and building societies offering Help to Buy Isas are listed below.
- Bank of Scotland
- Buckinghamshire Building Society
- Chelsea Building Society
- Clydesdale Bank
- Chorley Building Society
- Newcastle Building Society
- Nottingham Building Society
- Ulster Bank
- Virgin Money
- West Brom Building Society
- Yorkshire Bank
- Yorkshire Building Society
Before opening an account, it's also worth speaking to your local building society, as some offer Help to Buy Isas for local residents and existing customers. Providers for local residents include:
- Darlington Building Society
- Monmouthshire Building Society
- Penrith Building Society
- Progressive Building Society
- Tipton & Coseley Building Society
- Vernon Building Society
How does the bonus get paid?
If you've saved up for your mortgage deposit using a Help to Buy Isa, here's how you can claim your bonus:
Step 1: Close the account when you're ready to buy your first home. 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 – you can't put it towards other costs to do with buying, such as conveyancing fees.
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 up £12,000, you can put that all into the Help to Buy Isa at once.
Paying an exchange deposit
You'll probably have to pay an exchange deposit of 10% when you exchange contracts with the person you're buying from (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. The full amount of your exchange deposit will need to come from an alternative source.
You should mention this early on in the process to your conveyancer, who could negotiate a lower exchange deposit with your seller.
Are there restrictions on saving?
For anyone saving up for a mortgage deposit, a Help to Buy Isa is a very attractive option.
However, there are some restrictions:
You can only save up to £200 a month into a Help to Buy Isa, which works out to £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.
Frequently asked questions
Below are some of the common questions asked in relation to Help to Buy Isas:
- 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
|Yes, but no more than £4,000.|
|What is the |
I could receive?
|£3,000 if you save the maximum |
amount of £12,000.
|£32,000 if you save the maximum |
amount over 32 years - a bonus
this large will only be available if
you're using the lifetime Isa for
|When is the |
|When you buy a home. The bonus |
is usually paid to your conveyancer.
|Bonuses are paid monthly.|
|What’s the |
|£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?
|You need to have saved at least |
£1,600. This can be done in three
months if the maximum deposits
|You have to have had the |
lifetime Isa for at least a year.
|Who can open it?||Any first-time buyer over the |
age of 16.
|Anyone aged 18-39 – but if you |
want to put the deposit towards
a property, rather than accessing
it in retirement, you'll need to be
a first-time buyer.
|What kind of Isa |
|Help-to-Buy Isas are only available |
as cash Isas.
|Lifetime Isas are available as both |
cash and stocks & shares Isas.
|How many |
|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 for local
residents and existing customers.
|There are currently 10 lifetime Isa |
providers – but only one of these
(Skipton Building Society) offers a
cash lifetime Isa.
|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
|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.
|You can withdraw money for |
buying your first home, if you
are diagnosed with a terminal
illness, or wait until you’re over
60. Withdrawing money for any
other reason will result in a 25%
|How long will it |
be available for?
|New accounts are available until |
2019, at which point Help to Buy
Isas are being withdrawn from
|There is currently no end date.|
|Can I transfer |
|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
|You can transfer to an alternative |
lifetime Isa. If you transfer to a
different type of Isa, you’ll be
charged the withdrawal penalty.
|Can I open more |
|No - you're only allowed one.||You can open more than one |
lifetime Isa, but you can only
open and pay into one each
Want expert advice on saving for a mortgage?
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.