An ISA that helps first time buyers get on the property ladder will be closing in just 10 days.
And all the advice seems to be that, if you are thinking about buying a house, even if not for a while, now is the time to open an account, or you could lose out on what is effectively free money.
The Help to Buy ISA will close to new account holders at midnight on November 30, 2019.
In essence, if you are saving to buy your first home, put money into a Help to Buy ISA and the Government will boost your savings by 25%. So, for every £200 you save, you will receive a government bonus of £50. The maximum government bonus you can receive is £3,000.
There are a range of Help to Buy ISAs from banks and building societies to choose from. Even if you have no savings, you can open the ISA with just £1 and still get the same benefits when you are able to save.
The clock is ticking, however.
Who is eligible?
You have to be at least 16 years of age, have a national insurance number, and not own a house anywhere in the world.
You must also be a UK resident and have not opened an ISA this tax year. (If you have there are some extra steps you would have to take below).
How to qualify for the government bonus?
The home you eventually buy must be in the UK, have a purchase price of up to £250,000 (£450,000 in London), be the only home you will own, be purchased with a mortgage and be where you intend on living.
You can use the Help to Buy ISA with other government schemes, including the Help to Buy Equity Loan scheme and Shared Ownership.
How does it work?
The accounts are available to each first time buyer, not each household. This means that if you are planning to buy with your partner or a friend, for example, you could each receive a government bonus of up to £3,000 towards your first home - £6,000 in total.
You can save up to £200 a month into your Help to Buy: ISA. However, in your first month, you can deposit a lump sum of up to £1,200.
The minimum government bonus is £400, meaning that you need to have saved at least £1,600 into your Help to Buy ISA before you can claim your bonus. The maximum government bonus you can receive is £3,000 – to receive that, you need to have saved £12,000.
When you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus.
Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s or estate agent’s fees, or for any other indirect costs associated with buying a home.
Who are the providers?
- Aldermore
- Bank of Scotland
- Barclays
- Buckinghamshire Building Society
- Chelsea Building Society
- Chorley Building Society
- Clydesdale Bank
- Cumberland Building Society
- Darlington Building Society
- Halifax
- HSBC
- Lloyds
- Monmouthshire Building Society
- Nationwide
- NatWest
- Penrith Building Society
- Progressive Building Society
- Newcastle Building Society
- Nottingham Building Society
- Santander
- Tipton & Coseley
- Ulster Bank
- Vernon Building Society
- Virgin Money
- West Bromwich Building Society
- Yorkshire Bank
- Yorkshire Building Society
The best rates:
At the time of writing, the providers with the best interest rates are:
Barclays - 2.58% AER Variable
Nationwide - 2.5% AER Variable
Natwest - 2.5% AER Variable
Do I need to bank with my chosen provider?
You do not have to hold your main account with these banks, nor do you eventually have to get your mortgage with them.
The Help to Buy ISA will only be available until November 30, 2019, so if you have a 16-year-old at home who may want to buy a house in the next 10 years, it is well worth getting them to open an account and deposit £1.
After that date, they won’t be available to new savers anymore – but if you opened your Help to Buy ISA before then you can keep saving into your account until November 30, 2029, when accounts will close to additional contributions.
All government bonuses will have to be claimed by December 1, 2030.
What Martin Lewis has to say about ISAs:
If you have opened a cash ISA this tax year
If you have paid into a cash ISA this tax year, in order to open a Help to Buy ISA, you will have to transfer the money from your active cash ISA into a Help to Buy ISA. You can transfer up to £1,200 of your active cash ISA balance into your Help to Buy ISA.
Anything more than this should be moved into either a stocks and shares ISA, an Innovative Finance ISA, Lifetime ISA or a non-ISA account. However, the total amount saved must not exceed the annual subscription limit for ISAs.
Savers are recommended to speak to ISA managers to discuss the options they have.
