Help to Buy ISAs: Everything you need to know

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As property prices across the UK continue to rise, getting your foot on the property ladder is becoming more difficult than ever. Unless you’re lucky enough to win the lottery, or your parents/grandparents are able to cover the cost of the deposit, you’re going to need to save. The amount you’ll need for a deposit varies between 5% and 20%, and because the cost of general living is rising too, saving is difficult for many first-time buyers.

Thankfully, if you’re a first-time buyer saving for a mortgage deposit, the UK Government has introduced a new Help-to-Buy ISA designed to help you achieve your dream of owning your first property, so you won’t need to sacrifice that meal out anymore!

How does the Help-to-Buy ISA work?

Essentially, if you’re saving to buy your first home, you can place money in the ISA and earn 4% interest tax-free, and the government will also add 25% extra to the total amount when you go to buy your first home.

In your first month, you are able to add £1,200 to the ISA and then £200 every month as long as the scheme lasts. Currently, the scheme is projected to run until December 2030. There is no obligation for you to add money to the ISA each month, but you are unable to make back payments for missed months, so if you miss a payment of £200, you cannot add £400 the following month.

At the point when you use the ISA to pay for your deposit, the government will add 25% tax-free to however much is in the ISA. However, you need to have at least £1,600 saved in order to get the basic bonus (£400), and the maximum amount you can receive a bonus on is £12,000 (£3,000); you can continue to put money into the ISA beyond £12,000, but the government will not add more than a £3,000 bonus.

Who is eligible to open a Help-to-Buy ISA?

Anyone who is a first-time buyer can open an ISA as long they’re aged over 16. You can open one from December 2015 to December 2019, and the bonus payments will run until December 2030. You also need to have a valid National Insurance number, be a UK resident and not have another cash ISA in the same financial year; additional steps will need to be taken if you opened a cash ISA in the same year that you wish to open a Help-to-Buy ISA.

If you are saving up for a deposit with a partner who is also a first-time buyer, he or she will be able to open their own ISA. The Help-to-Buy ISA is designed for individuals, so essentially if you and your partner can save £12,000 in each ISA, you will both receive the maximum bonus of £3,000! It’s important to note that if you’re buying a property with someone who is not a first-time buyer, you’ll be able to open an ISA, but they will not.

What happens when the time comes to buy a property?

Firstly, congratulations! Buying your first home is an exciting time and here at CPS Homes we can help the process run as smoothly as possible. When the time comes to use the money, you first need to check the value of the property you’re buying. The ISA can only be used on properties valued below £250,000 (£450,000 in London); you can also buy any type of property, you’re not restricted to just new build properties.

The money can be used with any mortgage type, you don’t have to use a Help-to-Buy mortgage, but the money cannot be used to purchase a mortgage on a buy-to-let property. You don’t have to use the same bank where your ISA is located for the mortgage, and if you have any money in other savings accounts, the ISA money can be combined with this for a deposit.

When the time comes to use your saved funds, you need to get your solicitors to apply for the money from the government. You will close down your ISA and transfer the funds into a separate account, you’ll then receive a closing letter from your bank or building society which your solicitor will use to apply for the government bonus.

What if I don’t plan on buying a property or have changed my mind?

Even if you aren’t planning on buying a property yet, it’s worth opening a Help-to-Buy ISA as you only need to save up £1,600 to be eligible for a £400 bonus. If you keep paying into the ISA, you’ll find that the balance quickly rises, and then if the time comes when you decide to buy a property, you’ll be able to take advantage of the higher bonuses awarded by the government.

If you decide that owning your own home isn’t for you, and for some people it’s not, you don’t lose the money in the ISA and you can withdraw your savings whenever you want. Obviously, you’ll lose the bonus payments, but the money will still be tax-free and will contain 4% interest as well!

Are you considering buying your first property in Cardiff? If so, we have hundreds of beautiful properties across Cardiff in many sought after areas such as Cardiff Bay, Cyncoed and Pontprennau. To find out more about the buying process, or the Help-to-Buy ISAs, please contact us today on 02920 668585 or email

05 February 2016


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