Posted 10 September 2015 by Keith Osborne
With a Help to Buy: ISA you can receive up to £3,000 as a bonus to your savings as well as earn around 2.5% interest on the savings you accumulate. For those first-time buyers having difficulty saving up the deposit for a new home, it's additional money that can be a crucial factor in whether you get on the property ladder or not.
Things to know about Help to Buy: ISA
- The money can only be used towards the purchase of a home.
- The home must be your sole property and where you intend to live.
- The cash can be used to buy a property valued at £250,000 and under outside London or £400,000 or less within London.
- It must be purchased with a mortgage.
- The bonus money will be paid only after the house sale is complete although the savings amount plus interest can be used towards the deposit.
- A couple can apply for a Help to Buy ISA account individually. In other words, both can open up accounts and each claim a separate bonus of £3,000.
How does a help to Buy: ISA work?
You open up a Help to Buy ISA with a participating bank or building society. To begin the account you must initially put in £1,200. You can deposit up to £200 a month although you don't earn your first bonus (£400) until you have £1,600 in the account. For each monthly amount you put into the account you will receive a 25% bonus. The maximum bonus you can receive is £3,000, which would be on contributions totalling £12,000.
How do I receive the bonus?
You can take out the money at any time when you're buying a home. Once you complete purchase of the property, your solicitor applies for the bonus and you inform your bank or building society you're closing the account. The payment goes through your solicitor and is then passed on to the seller.
You must be a UK resident, be over 16 and have a valid National Insurance number. You must also not own a property anywhere else in the world. You cannot have another cash ISA active in the same tax year. If you have already opened up a cash ISA in the same tax year there are steps you can take so you can still open up a Help to Buy ISA.