The Help to Buy ISA was launched on the 1st of December 2015 and runs until the end of November 2019, with all bonuses having to be claimed by the 1st of December 2030. With just under a year left to open and start saving, now could be a good time to consider one. They offer an alternative to taking out a loan to help fund an initial deposit for your first home along with other benefits, with the way they work and how you can take advantage of them explained below.
How They Work
Help to Buy ISAs work in a similar way to regular ISAs, except that the government will top up any contributions made by 25% (up to a limit of £12,000). A minimum amount of £1,600 is required to qualify for a government bonus and you can start with a deposit of anything up to £1,000. After the initial deposit has been made you can only save up to £200 a month, so you can’t simply transfer £12,000 across, for example. Then when it comes to buying your first home with the ISA, 25% will be added to it as long as it’s between the minimum and maximum contributions.
In order to open and use a Help to Buy ISA you simply need to be a first-time buyer over the age of 16. The good news is that they are available to each first-time buyer and not each home, so if you have a partner or want to buy a property with a friend, you can combine the savings and get up to £6,000 from the government towards your home. Any home worth under £250,000 (or £450,000 in London) is eligible and it can be used with any mortgage, not just a Help to Buy one.
Restrictions of Help to Buy ISAs
Along with the aforementioned criteria, there are a few further restrictions. You can’t buy a property overseas with a Help to Buy ISA or open more than one. Technically you can’t buy a property and rent it out with one, but if your circumstances change and you have to work away, for example, you will be able to rent it out. If you buy with the intention to rent it out and are caught, the government will attempt to get its bonus money back.
Should I Open One?
Any first-time homebuyers will be looking into getting a good financial position before purchasing a property by ensuring that they fulfil their financial obligations. If you are considering buying a house in the years should seriously consider open one. As long as you meet the qualifying criteria and open one before the 2019 deadline then there’s little reason to not open a Help to Buy ISA.