How Help To Buy ISA Works For Your House Deposit

You opened a Help to Buy ISA just before the deadline in 2019. Now you’re ready to make the most of it. 

You’ve been steadily saving, but with house prices still high, every extra pound counts. 

In this article, you’ll learn how to get the best out of your ISA. 

We’ll show you when and how to claim that 25% government bonus, the simple steps to close your account properly, and how to use your savings at each stage—from the first deposit to the final payment.

We’ll also share tips for working with mortgage lenders and look at other savings options, like the Lifetime ISA, if you’re looking to build your deposit even more.

How Does the Help to Buy ISA Work?

The Help to Buy ISA was created to help first-time buyers save for a house deposit. 

It works a bit like a regular savings account, meaning that the money you deposit earns interest over time and is tax-free.

But here’s where it gets better: for every £200 you save, the government gives you a 25% bonus.

Here’s how it works:

• You make regular deposits (up to £200 per month).
• The bank or building society pays interest on the money you’ve deposited, usually at rates between 0.75% to 2.5%, depending on the provider. This is your standard savings interest.
• The government then adds a 25% bonus on the total amount that you deposit into the account—up to a maximum of £3,000 (if you save £12,000).

So, if you save £12,000, you could end up with £15,000 to put towards your deposit—your savings, plus interest, plus the government’s bonus.

Now, there’s a bit of a catch. The Help to Buy ISA scheme closed to new applicants back in November 2019. 

But, if you were lucky enough to open one before then, you can keep adding to it until November 2029. 

The bonus, though, has to be claimed by December 2030. So, if you have one of these ISAs, it’s still a brilliant tool to boost your savings.

Note: The government bonus isn’t a loan, so you don’t need to pay it back. It’s simply a boost to help you buy your home.

Help to Buy ISA Bonus Breakdown

To give you a better idea of how your savings can grow, here’s a simple breakdown of the savings and the corresponding government bonus:

Your Savings	Government Bonus (25%)	Total Deposit
£1,600	£400	£2,000
£3,000	£750	£3,750
£5,000	£1,250	£6,250
£8,000	£2,000	£10,000
£12,000	£3,000	£15,000

This table helps illustrate how the bonus adds up as your savings grow. Remember, you need to save at least £1,600 to qualify for any bonus, and the maximum bonus you can receive is £3,000.

Can You Use the Help to Buy ISA for a Deposit?

Yes, but it’s a little more nuanced than that. The government bonus can only be used at the final stage—when you’re completing the purchase of your home. 

So, while you can use the money you’ve saved in the ISA for the initial deposit when exchanging contracts, the bonus itself comes later and helps top up your mortgage deposit when you complete.

Think of it this way: the funds you’ve saved are there for the initial deposit at the exchange of contracts, and the government bonus is the cherry on top, arriving at the completion stage to help finalise the deal.

Why Can’t You Use the Bonus for the Initial Deposit?

You might be wondering why you can’t use the government bonus for the initial deposit when you exchange contracts. 

The reason is simple: the bonus is only paid after you officially close your ISA account and provide the documents to your solicitor. 

This means the bonus isn’t available right away at the exchange stage, which is when the initial deposit is due.

The exchange deposit often needs to be paid quickly, sometimes with short notice, while claiming the bonus takes more time and involves paperwork. 

Because of this, the bonus is only available at the completion stage, once everything is finalised. 

The government wants to make sure the bonus goes directly towards buying your home, not any other upfront costs that might come up.

Can I Use the Interest Earned in My ISA to Get the Bonus Faster?

You might be wondering if the interest earned on your Help to Buy ISA can help you get the government bonus sooner. 

Unfortunately, it doesn’t work that way. The government bonus is only based on the money you’ve saved directly, not on any interest earned. 

So even if interest pushes your balance over £12,000, the bonus is still calculated only on the savings you put in—up to £12,000.

As mentioned, interest rates for Help to Buy ISAs are usually between 0.75% and 2.5%, depending on your bank. 

While earning interest is great for growing your savings, it doesn’t count towards the government bonus. 

The bonus is strictly based on what you deposit, up to a maximum of £200 per month. So, while interest is a nice extra, it won’t help you get that bonus any faster.

How to Use the Help to Buy ISA for a Deposit

Here’s a quick rundown:

1. Keep Saving – You can keep adding up to £200 a month into your Help to Buy ISA. In the first month, you could even deposit up to £1,200 to kick things off with a boost. The more you save, the bigger the bonus—up to that £3,000 limit.
2. Request a Closing Statement – When you’re ready to use your ISA savings, you’ll need to close the account. This isn’t as dramatic as it sounds—it just means you’ll request a closing statement from your ISA provider. This statement is crucial, as your solicitor will use it to claim the government bonus on your behalf.
3. Pass It On to Your Solicitor – Once you’ve got your closing statement, hand it over to your solicitor. They’ll use it to claim the bonus from the government, which will then be added to the funds available for completing the purchase of your home.

How to Close the Help to Buy ISA

If you’re wondering how to close the Help to Buy ISA, it’s actually quite straightforward. 

You’ll need to get in touch with your ISA provider (typically your bank or building society) and let them know you’re ready to close the account. 

They’ll provide you with a closing statement, which is essential for claiming your bonus.

A word of caution: don’t just withdraw all the money from your account! If you do this without formally closing the ISA, you won’t be able to claim the government bonus. 

Instead, follow the proper procedure to close it and get that statement.

Help to Buy ISA: How Does It Work for Exchange Deposits?

It’s worth clarifying that the Help to Buy ISA savings can be used towards the exchange deposit, but the bonus itself can’t. 

The exchange deposit is typically around 10% of the property price, and it’s paid when you exchange contracts. The bonus, however, only comes into play at the completion stage.

So, if you’re planning to use your ISA funds for the exchange deposit, you’ll need to make sure you have enough saved up without relying on the government bonus. 

The bonus will then help reduce your overall mortgage amount or cover any remaining balance when you complete the purchase.

How Help to Buy ISA Works with Mortgage Lenders

Another common question is: can the Help to Buy ISA be used for deposit when dealing with mortgage lenders? 

Absolutely, but there are a few things to keep in mind. 

Mortgage lenders will want to see proof of your savings, and your solicitor will need to coordinate the release of the government bonus at the right time.

Some lenders may also offer specific products tailored for first-time buyers using a Help to Buy ISA, so it’s always worth chatting with a mortgage broker to find out what deals might be available to you. 

The good news is that the bonus from the Help to Buy ISA can help reduce the amount you need to borrow, potentially giving you access to better mortgage rates.

Eligibility and Restrictions for the Help to Buy ISA

It’s important to know that the property you buy must be valued at £250,000 or less (or £450,000 in London) to qualify for the Help to Buy ISA bonus. 

Additionally, the property must be your only home, meaning you can’t use the bonus for buy-to-let investments or second homes.

If your house purchase falls through, you can reopen your Help to Buy ISA and put the funds back. 

Your solicitor will provide a document called a “purchase failure notification”, which you’ll need to give to your bank to reopen the account.

Alternative Schemes to Help to Buy ISA

If you missed out on opening a Help to Buy ISA, don’t worry—there are still other ways to get on the property ladder. 

One popular alternative is the Lifetime ISA (LISA), which also offers a 25% government bonus. 

However, it comes with different rules, like needing to have the account open for at least 12 months before you can use it for a deposit.

 You can save up to £4,000 a year in a LISA, and the government will top it up with a bonus of up to £1,000 annually.

There’s also the First Homes Programme, which provides first-time buyers with the opportunity to purchase new-build properties at a discounted price (usually at least 30% off the market value). 

This scheme prioritises key workers like teachers, nurses, and members of the armed forces. 

Is the Help to Buy ISA Right for You?

If you already have a Help to Buy ISA, it’s definitely worth making the most of it. 

With rising house prices, every bit of extra cash helps, and the 25% bonus is nothing to sneeze at.

However, it’s important to remember the limitations: the property you buy must be valued at £250,000 or less (£450,000 in London), and it has to be your only home—no buy-to-let investments allowed here.

The Bottom Line

The Help to Buy ISA isn’t available to new savers anymore, but if you’ve got one, it’s still a great way to boost your savings and make buying your first home a bit easier. 

Just make sure you close your account properly, claim your bonus at the right time, and make the most of every pound you’ve saved. 

Getting onto the property ladder can feel challenging, but with a bit of planning (and that helpful government boost), you’ll be holding the keys to your new home before you know it.

If you’re feeling unsure about the process, have a chat with a mortgage broker. They can help you understand your options and guide you through each step. 

Get in touch with us, and we’ll match you with a qualified broker who can make everything easier from helping you find the best deals to making sure you get the right mortgage for your needs.