IMPORTANT - The Help To Buy ISA is no longer available to open, the only government-back option currently available is the Lifetime ISA. This post is to assist those of you who already have the Help To Buy ISA and may need a refresher regarding how it works.
The Help To Buy ISA was a government-backed savings scheme to help first-time buyers get on the property ladder. Applications closed on November 30th 2019 and was replaced with the Lifetime ISA.
The benefit of the Help To Buy ISA was that savers were eligible to receive a 25% bonus from the government on top of their savings up to the total bonus value of £3,000. In the first month of the account opening, the maximum deposit you were able to make was £1,200 with the minimum required to keep the account open being £1. For each month after, the maximum deposit amount you can make is £200. Please note, the £200 monthly deposit limit applies even when you make withdrawals on the account.
If you deposit £150 in month 2 then choose to withdraw £100
£150 - £100 = £50
You can only deposit £50 for that month as that will bring you to your limit:
£150 + £50 = £200 MONTHLY LIMIT
The great thing about the Help To Buy ISA is you are able to make withdrawals without having to pay a penalty fee. The 25% government bonus is added to savings up to the value of £12,000. This means £12,000 (max savings) plus £3,000 (max government bonus) gives you £15,000 towards the deposit of your first property.
Unlike the Lifetime ISA, the government bonus IS NOT automatically added to your savings. When you begin your home-buying journey, you will need a solicitor to claim the bonus on your behalf.
If you would like to read about the Lifetime ISA, click here.