What is a Help to Buy ISA?
The Help to Buy ISA is a Government tax-free savings account designed to give first-time buyers struggling to save for a deposit a cash boost.
How does it work?
You can pay up to £200 a month into a Help to Buy ISA, after an initial one-off £1,000 opening deposit in the first month. And for every £200 you save the Government will stump up a £50 bonus.
The total Government bonus you can receive is capped at £3,000, which would be earned on a cash balance of £12,000. The minimum Government bonus paid is £400, which would require £1,600 in savings.
Am I eligible?
Help to Buy ISAs are restricted to first-time buyers who have never owned a home, or even part of one, before. It can be used to buy properties with a maximum value of £250,000, or £450,000 if you're buying in London.
What are the benefits?
Both the Government bonus and interest on your savings are paid tax-free. And if you are buying with a partner you can open a Help to Buy ISA each, meaning you'll get double the tax-free savings allowance and double the Government bonus.
The Help to Buy ISA can also be used in conjunction with other Government homebuying schemes such as Help to Buy and Shared Ownership.
How can I use my savings and bonus?
The Help to Buy tax-free bonus is paid at the point you complete on your property purchase. This means you'll have to raise the initial deposit yourself (which is payable at exchange) and use money to reduce your overall mortgage amount and subsequent monthly repayments.