A guide to Help to Buy: ISAs

What is a Help to Buy: ISA?

The Help to Buy: ISA is designed to help first time buyers save for their first home. The Government will boost your savings by 25%. This means, for every £200 you save, you will receive a bonus of £50 (up to a maximum of £3,000 on balances of £12,000).

The Help to Buy: ISA is a Cash ISA. You cannot pay into another Cash ISA in the same tax year.

How it works

Since the 1st December 2019, Help to Buy ISAs are no longer available as new accounts. If you opened a Help to Buy ISA before 1st December 2019 the following information applies to your Help to Buy: ISA

1. Save up to a maximum of £200 per calendar month and an additional £1,000 in the first calendar month when you open the ISA - you need to have saved at least £1,600 before you can claim your bonus. You can make additional deposits into the account during any given month provided the £200 monthly limit is not exceeded
2. Close your Help to Buy: ISA to receive a closing statement when you are ready to buy your first home
3. Apply for your 25% government bonus via a solicitor or conveyancer

How the bonus can boost your savings

How to claim your bonus

When you find your first home, your mortgage lender will ask you to hire a solicitor or conveyancer. They will handle all of the legal aspects of buying your home. You will need to take the following steps for your solicitor or conveyancer to claim your bonus:

1. Close your Help to Buy: ISA
   You must close your account in one transaction. To close a West Brom Help to Buy: ISA you will need to visit one of our branches. When you close your account you will be provided with a closing statement. You must not withdraw the balance from the account before you close it as the closing balance is the key to calculating your bonus.
2. Take your closing statement to your solicitor or conveyancer
   Your solicitor or conveyancer will claim the bonus on your behalf. To do this, they will need your Help to Buy: ISA closing statement. Please note: the bonus must be claimed within 12 months of closing your Help to Buy: ISA.

When is the bonus paid?

The government bonus is paid once it is certain the transaction will go ahead.

When you buy a home you will usually have to put down two types of deposit – the first when you exchange contracts and the second at completion. Your solicitor or conveyancer will add the bonus to the deposit at completion of the property transaction.

The bonus cannot be used for the deposit due at the exchange of contracts or to pay for solicitor’s fees, estate agent fees or any other indirect costs associated with buying a home.

When should you close your Help to Buy: ISA?

If you want to take advantage of the government bonus you should request a full closure of your Help to Buy: ISA around 30 days before you expect to complete your property purchase. A closing statement will be provided within 7 working days of full closure of the account. You will then need to provide your conveyancer with your closing statement.

You should contact your conveyancer for assistance if it is not possible to request closure of your Help to Buy: ISA 30 days before the expected completion date. If the government bonus is needed urgently, there is a faster bonus application process conveyancers can follow.

What properties are eligible for the bonus?

The government bonus is available on home purchases of up to £250,000 outside of London and up to £450,000 in London. The property must be the only home you will own, be where you intend to live and be purchased with a mortgage.

For a shared ownership property purchase the price cap applies to the full sale price of the property rather than just the share you initially buy. The full sale price is a multiple of the equity share you are buying.

For a joint ownership (i.e. tenants in common and joint tenant) property purchase the house price cap applies to the full sale price for the whole property rather than just the share you are buying.

If you are unsure, you should speak to your solicitor or conveyancer and they will be able to advise you on whether the property you are purchasing is within the price limit and if it is eligible for a government bonus.

What happens if the house purchase falls through?

If the property purchase does not proceed after you have closed your Help to Buy: ISA in anticipation of claiming a bonus, you can re-open the account. To do this, your solicitor or conveyancer will give you a ‘purchase failure notification’ confirming the property purchase did not complete.

You should take the purchase failure notification to your Help to Buy: ISA provider who will re-open the account. Alternatively, you may approach a different provider to open a new Help to Buy: ISA or any other ISA.

The purchase failure notice should be presented to an ISA provider within 12 months of issue.

If the government bonus has already been transferred, your solicitor or conveyancer will need to return the bonus to the Scheme Administrator before providing you with a purchase failure notification.

Other things to consider

ISAs have an annual limit this tax year (6 April 2019 – 5 April 2020) of £20,000 for new contributions, and you can’t pay more than this limit into any combination of permitted ISAs within the same tax year.

The West Brom Help to Buy: ISA is a Cash ISA and you can only add new contributions into one Cash ISA in a tax year.

The Help to Buy: ISA allowance is lower than the overall ISA allowance. If you want to reach the full ISA limit in a tax year, you'll have to invest any other new contributions into a stock and shares ISA and/or a lifetime ISA and/or an innovative finance ISA.

If you are planning to buy your first home with someone else who is also a first time buyer, you can both open a Help to Buy: ISA and both claim government bonuses of up to £3,000.

Participation in the Help to Buy: ISA Scheme is subject to the scheme rules which can be found at ownyourhome.gov.uk