What is a Help to Buy ISA?

When you first opened your Help to Buy ISA, you could deposit a lump sum of up to £1,200.  The consequent months you could save up to £200 a month.

When you close your ISA, you will receive 25% of your total savings as a bonus from the Government, so for every £200 you save, you will receive a Government bonus of £50.

The minimum Government bonus you can claim is £400, so you need to have at least £1,600 in your Help to Buy ISA when the time comes to close it.  The maximum bonus you can receive is £3,000, for which you’ll need to have saved £12,000.  You can continue to save money in your Help to Buy ISA once you reach £12,000, however you won’t get more as a bonus on top.

It is important that if you plan to use a Help to Buy ISA for your purchase that you inform your solicitor as it is they who will apply for the bonus.  The full process is as follows:

1. Your solicitor will inform you when you are close to exchanging contracts, and at this time you will need to instruct your bank or building society to close your ISA to receive the bonus.  They will then give you a closing letter confirming your account number and closing balance
2. Your solicitor will complete a Bonus Request Application with Help to Buy.  You will need to have signed this to confirm you do not own, and have never owned any interest in property or land anywhere in the world, whether it was bought or inherited.  The closing letter from your bank or building society will be needed to form part of the application
3. It can then take up to 30 days from closing the ISA to receive the bonus and the monies must arrive with your solicitor in time for completion of your purchase, so timing is of the essence.

The bonus money you receive as part of the Help to Buy ISA will be included within the total funds available for the property transaction.  The bonus cannot be used for:

• Home Exchange Deposit – this is because you only receive the bonus from the Help to Buy ISA at completion, and the home exchange deposit is required at exchange of the contracts during the earlier stages.  You can use the money you have saved in the ISA towards this deposit, but not the bonus, so beware if you are planning on including the bonus as part of the standard 10% deposit required
• Solicitor’s fees
• Estate agent fees
• Any other indirect costs.

There are criteria for the property you wish to buy to qualify for the ISA.  The property must:

• Be in the UK
• Not have a higher purchase price than £250,000 (£450,000 in *London)
• Be the only home you will own and be where you plan to live
• Be purchased with a mortgage (including shared ownership and self-build) opposed to a cash buyer

You are not limited in terms of the type of property, for example a new build, and you cannot be buying the property as a buy-to-let.

*The scheme uses the standard London boundary as defined by the Office for National Statistics. The table below sets out the London boroughs which will have a property price cap of up to £450,000: