Help to Buy ISAs are designed to help give first-time buyers a leg-up on to the property ladder. With only a year left to open an account, here are the pros and cons.

With the Government's Help to Buy ISA scheme set to close a year from now on 30 November 2019, here's everything you need to know to make the most of it.

The Help to Buy ISA is a special savings account designed to help first-time buyers get on the property ladder. 

You can save up to £200 a month into the account (with a boosted limit of £1,200 in the first month) and any interest you receive on your cash will be paid tax-free.

When you come to buy a home, the Government will top up your savings with a bonus of 25% – also tax-free. The maximum bonus available is £3,000 which applies to £12,000 savings.

Although the Help to Buy ISA will no longer be available from 30 November 2019, as long as you have opened an account by that date, you can keep saving into your account until 30 November 2029 (when accounts will close to additional contributions).

There's a lot more to know about these accounts though, which we've set out below in 10 clear pros and cons.

10 pros of the Help to Buy ISA 

1. Tax-free interest: as the account is an ISA, you won’t pay tax on any interest you earn. 

2. The Government's 25% bonus: the effect of this currently outstrips even the top savings rates on the market. 

3. Keep saving for as long as you like: once the account is open, you can pay in £200 a month indefinitely until November 2029. You will have to claim your bonus by 1 December 2030 (although this could change under a different Government).

4. Access to your cash: you can get your hands on your savings – plus the tax-free interest they've generated – at any time. But if this is before you buy a home you'll forfeit the Government bonus.

5. You can have one account each: so if you’re buying as a couple, the maximum bonus is £6,000.

6. Use it on any kind of property: that means a new-build or resale. It just has to be in the UK and bought for you to live in.

7. Plenty of providers: take your pick and compare interest rates from the likes of Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander and Virgin Money. You can see a comprehensive list of providers on the Government's website here.

8. Free to switch: if the rate becomes uncompetitive, you're free to switch to a better account. Just make sure you carry out an official ISA transfer to retain the tax-free status on your cash.

9. Don't have to dump previous years' ISAs: they can sit alongside your Help to Buy ISA. However, you can only pay into one cash ISA (such as Help to Buy) and one stocks and shares ISA in any single tax year.

10. Can be combined with other first-time buyer schemes: such as the Government’s Help to Buy Equity Loan and shared ownership. Find out how the Government's most recent measures can help first-time buyers here.

10 cons of the Help to Buy ISA

1. Saving can be slow: with maximum contributions standing at £200 a month, it will take 4.5 years worth of saving to claim the maximum £3,000 Government bonus.

2. Strictly for first-time buyers: to qualify for the account you can never have owned a home (or even a share of one) in the UK or anywhere else in the world. This also applies to couples, so if one partner owns or has previously owned property (including inherited), that person will not be eligible.

3. Minimum savings to get bonus: you'll need a balance of least £1,600 to qualify for the 25% Government bonus which, in this case, would be £400.

4. No interest paid on Government bonus: you'll just get the flat 25% of the balance you've managed to save between £1,600 and £12,000.

5. Price cap on property value: homes you can buy with the account must cost less than £250,000 – or £450,000 in London – and be bought with a mortgage. If you're buying under a shared ownership scheme, these caps apply to the whole property value, not just the share you are buying. 

6. You can't put the Government bonus towards your initial deposit: that's because it's only paid at completion to stop you nabbing the bonus and then pulling out of the purchase. You can still use the funds you've saved into the Help to Buy ISA yourself, plus the tax-free interest, for the deposit, which is paid at exchange of contracts, but you will have to wait until completion to add the Government bonus. This should be explained to the seller through your solicitor, so they are comfortable that the Government bonus will be forthcoming.

7. Bonus will be paid to your solicitor: the Government pays its bonus direct to your solicitor or property conveyancer just before completion – and they will need to apply for it on your behalf. You are likely to be charged £50 (+VAT) for them to make the bonus application.

8. Not available with stocks and shares: unlike the Lifetime ISA - which also pays a tax-free Government bonus - the Help to Buy ISA is available as just cash.

9. Time limit to open an account: banks and building societies will pull their Help to Buy ISAs off the shelves in December 2019.

10. Transfers in from existing ISAs are limited: you can make a 'transfer in' from an existing ISA into a Help to Buy ISA, but only if the balance being transferred is £1,200 or less. That's because this is the maximum you can open the account with. 

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Planning on opening a Help to Buy ISA or already got one? Share your thoughts on the account by posting a comment below...

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