Can You Still Use a Help to Buy ISA?
Estimated reading time 7 minutes
We are seeing plenty in the news at the moment of interest rates, mortgage applications and property sales. Unfortunately, not all of it has been good as people find the move from renter to homeowner incredibly difficult.
Schemes such as the shared ownership scheme or the Help to Buy ISA have aided them to an extent and given many people an opportunity to access that first rung of the property ladder. Where are we today though? A report from Sky News in April 2024 showed that many believe shared ownership is failing as greedy landlords and housing associations ramp up their service charges. And the Help to Buy ISA, having now ended, has limited the number of people able to benefit from it. What if you had already opened a Help to Buy ISA though? Can you still use it to help you get a foothold on the property ladder? In a straightforward answer, yes. If you already have a Help to Buy ISA in place, you can continue to use it and reap its rewards when you go to purchase a home.
Let’s take a look so you know what to expect and how it may benefit you.
What is a Help to Buy ISA?
The Help to Buy ISA was launched in December 2015 and closed to new accounts at the end of November 2019. Introduced to help make home ownership easier, it rewarded first-time buyers by having a 25% bonus added to it by the government. With it being an ISA, the money you put into it is tax-free, and as interest builds, your savings grow, helping add to the bonus you can receive. The government bonus is capped at £3,000 and is only added to your saved amount when you use the ISA funds as your deposit for the home.
We should probably add too, that these Help to Buy ISAs are only able to be used on first-time buyer properties.
What property can a Help to Buy ISA bonus be used for?
Unlike other government property buying schemes, you are not restricted on the type of property you can buy. As long as you don’t exceed the value set by the government, you are free to purchase any home whether it be a new build or a property that has a long storied history on the open market. It must also be for a property with a mortgage. Your Help to Buy ISA bonus will not be issued if you are a cash house buyer.
How much can I put in a help to buy ISA?
Each month you can save up to £200 in a Help to Buy ISA, but should you miss a month of saving, you cannot make it up the following month by putting in anything above £200. This means your annual allowance is set at £2,400.
Whilst you cannot open a new Help to Buy ISA, those who currently have one can continue saving until November 30th, 2029. The 25% bonus must then be claimed by December 1st, 2030. If it’s not, you’ll lose it.
How much do I need in a Help to Buy ISA to get the bonus?
You will only be eligible for the bonus on a Help to Buy ISA once it has £1,600 saved in it. Anything below this amount will not see the bonus rate added to it. Once you have started to save above the minimum level, you can keep topping it up to help secure a better bonus but once you have £12,000 saved in the Help to Buy ISA, your bonus reaches the maximum of £3,000. Regardless of how much more you save; you’ll still only get £3,000 from the state. It’s free money though so don’t knock it.
Can I use more than one help to buy ISA?
You can only use one Help to Buy ISA yourself, but you could double up by saving alongside the person you are planning to buy a house with. This way you’ll be putting £400 into a bonus pot each month and stand to see £6,000 in total. Just remember, an ISA is an Individual Savings Account, so you’ll need an account for you and one for the other person buying to see the full £6,000 worth of Help to Buy ISA bonus at the end.
To help enhance the amount you have saved, you may also find that transferring your Help to Buy ISA could be useful. Despite new products not being available, some banks are still open to you transferring a Help to Buy ISA to them. This could see you secure better rates and top up your savings with not only the government bonus but a more impressive tax-free interest rate too.
How much can I spend on a property with a help to buy ISA?
When it comes to using your Help to Buy ISA, there are some restrictions in place. You’ll only be able to purchase a property valued at £250,000 or less (£450,000 or less in London.) Based on the current house price index for the UK, this means you’ll need to find a property some £30,000 cheaper than the national average (£283,000)
This may mean that some look to the shared ownership route as a way to secure a more valuable property by using their allowance to cover their portion of a shared ownership property. Unfortunately, this isn’t possible. Whilst you could use your Help to Buy ISA allowance on a shared ownership home, the total value, not just the share you own, must not exceed £250,000 (£450,000 in London).
This is the same if you are looking to use your hard-earned Help to Buy ISA savings alongside someone else. Regardless of the amount saved, even when combined, the property value is capped and cannot exceed the amounts mentioned.
How do I use my help to buy ISA?
You are welcome to withdraw the funds at any point, however, should you do this you will lose out on the bonus this cash could have accumulated. You’ll only be paid the bonus when it comes to completing the house purchase, so whatever you’ve got left when you buy is what you get the bonus added to.
It isn’t as simple as withdrawing the cash and handing it over. You’ll need to let your ISA provider know that you're closing your account. The funds can then be withdrawn and put into your account or the solicitors. The ISA provider will then confirm your withdrawal in writing. This must be given to your solicitor who will then apply to the government for the top-up. This can be time-consuming so it may be best to liaise with your solicitor at the earliest opportunity to see when you should set the withdrawal wheels in motion.
Can I use more than one ISA to help buy a first home?
You can only have one Help to Buy ISA, but you can have multiple cash ISAs to help bolster your tax-free savings. The total allowance for ISAs in one tax year is £20,000 so you’ll have to consider that if you have already reached a significant sum in either your Help to Buy or other cash ISAs.
Help to Buy ISAs are a great way to help secure that first property but with them now closed to new applicants, the attempts to get on the property ladder may be a little harder. Perhaps you already own a house but are finding that the options to help you secure a new property aren’t delivering much benefit. If so. Consider Bettermove. We help you sell your house fast enabling you to move quickly on the property market and secure your next move quickly. Presenting your home to a selection of pre-approved cash buyers, or buying it from you ourselves, we make it easy for you to move onto your next property plan without stress or delays. Better still, we do it for free. Our sell house for free model means we keep all those surprise fees and costly charges away from you, allowing you to take exactly what was paid for the home. Call us today to find out more.
