Help to Buy ISAs are a great way of saving money and getting a rather sizeable bonus on your savings (25%), most places offer them but the information about them isn’t always helpful and makes assumptions.
Here is our experience of Help To Buy ISAs.
Opening the account.
You have to be a First Time Buyer (sorry existing homeowners, this isn’t for you) and if there are 2 of you buying a house and you are both first time buyers you can both have a HtB ISA and both qualify for the bonus!
Maximum opening payment of £1,000 plus that month’s maximum deposit of £200 means your first month can be £1,200.
Maximum monthly amount is £200.
The maximum bonus amount you can claim is £3,000 – So you need to have saved £12,000 to do this – This is 55 months of savings, if you plan on saving for this long then you’d be better off looking at the new Lifetime ISAs instead.
Our interest was paid annually and when we closed down the ISA – And yes, you also get a bonus on the interest too!
The Bonus and when it’s paid.
This is the part that gets most people.
The bonus is only available at time of completion, it can’t be used towards the deposit required at Exchange. If you aren’t buying a new build then this probably won’t be an issue as Exchange and Completion are normally done at the same time.
For us as we are buying a new build it’s a little different, now your conveyancer should be able to advise you further but for information, here is our example.
We are buying a new build, at time of Exchange it’s normal for 10% of the property price to be paid – We had 5% in savings and 5% in the Help To Buy ISA, our conveyancer negotiated the deposit to be 5%, however we are still liable for the 10% if we decide to pull out of the purchase between Exchange and Completion. This is normal.
Closing Down your ISA and Claiming the bonus.
To claim the bonus you need to formally close down your ISA, this means contacting the bank/building society and closing the account – Don’t just withdrawal your money as this won’t count as closing down the account. When you close your account you are given a final statement which you then give to your conveyancer so they can claim the bonus for you. The money you’ve saved is then transferred to the account of your choosing.
The rules for how to close down your ISA vary from bank to bank, as does how they send the final statement – Some will send this in the post, some will print it in branch. Check with your bank as to their rules, the last thing you want to do is leave it until the last-minute and find they will send it through the post in 7-10 working days! (there are ways around this, but it’s unnecessary stress at a potentially stressful time!).
Once closed, you have 12 months to claim the bonus via the conveyancer.
Help to Buy ISAs are good for a quick bonus, the minimum amount of time you need to have one open for is 3 months, in this time assuming you open and save the maximum amount will give you £2,000 – £1,600 in savings and £400 bonus (not including any interest).
If you are saving long-term, look at the Lifetime ISAs, same 25% bonus but a larger opening balance and the ability to save more.
Help To Buy ISAs are only available to open until 30th November 2019. If you have one you can keep saving until 30th November 2029 and then you must claim your bonus by 1st December 2030. Effectively they are being replaced by the Lifetime ISA.