First-time buyers are being encouraged to open a Help to Buy Isa before the window for new applications closes in November.
Speaking on Good Morning Britain today, MoneySavingExpert.com founder Martin Lewis warned that would-be home owners will miss out on the Government’s 25% savings boost if they fail to take action in the next three months.
“The easiest, simplest form of help for first-time buyers to build a deposit closes to new applicants on 30 November,” he said. “If you may one day want to buy a home, consider opening one now with £1 or more, as then the facility stays available until 2029.”
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So what exactly is the Help to Buy Isa and how do you open an account?
What is it?
The Isa was announced by then-chancellor George Osborne in March 2015 and launched later that year in a bid to help first-time buyers save for a new home. Osborne promised that “for every £200 you save for your deposit, the government will top it up with £50 more”.
The maximum government bonus that savers can receive is £3,000. A lump sum of £1,200 can be deposited when the account is first opened, followed by up to £200 each month after that.
“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,” according to the official HelpToBuy website.
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How do you open an account?
The Isa is available at more than two dozen banks, building societies and credit unions, and the application process varies between providers. Some ask applicants to come into a local branch, while others offer postal, phone or online application systems.
Accounts can be opened with deposits as little as £1 and are available for each first-time buyer rather than households, so a couple could receive a total bonus of up to £6,000 towards their first home.
Who is eligible?
Applicants must be a first-time buyer and UK resident aged 16 or over, with a valid National Insurance number. The property being bought must also be in the UK and have a purchase price of up to £250,000, or £450,000 in London.
It must be the only home that the applicant will own; purchased with a mortgage; and where the applicant intends to live. Individual providers may also ask for other details such as details of the applicant’s addresses over the past three years.
Are there any drawbacks?
As MoneySavingExpert.com’s Lewis says, savers must apply before 30 November this year. Applicants then have until 30 November 2029 to pay into the account, and must claim their bonus by 1 December 2030.
If the applicant has opened a different cash Isa or paid money into an existing cash Isa this tax year, they will have to speak to their provider about transferring their account.
Savings can be withdrawn from Help to Buy Isa accounts without buying a home, but the government bonus will only be paid out to the account holder’s solicitor or conveyancer with funds at completion of a home purchase.
This means the cash in the Isa cannot be used as the initial deposit due at exchange of contracts or to pay other costs associated with purchasing a house.
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