Help to Buy ISAs

If you've got a Help to Buy ISA and you're buying with someone else who also has one, you can save up to £400 a month across your two Help to Buy ISAs and, when you come to buy, double the bonus.

Similarly, if the person you're buying with has a Lifetime ISA, you can both get the bonuses when you buy.

When you buy a home there are two types of deposit (though the same money's generally used for both). And, as the Government decided you'd only get the Help to Buy ISA bonus at completion (so no one could get it if they pulled out of a property sale), it only helps you with one of these types, and it's important to understand the difference.

• The home exchange deposit: During the process of buying a property, after your offer is accepted, once you've checked everything out you normally exchange contracts with the seller. At this point the seller will usually ask you to put down a 10% deposit (sometimes it can be negotiated lower to 5%) to secure the property. After that no one else can trump you as you and the vendor are committed to the sale.

  You then have time to work through your finances and any other issues towards completion, which is when you and the mortgage company hand over the remainder of the cash (see Buying a Home Timeline for more).

  While you can use the money you've saved in a Help to Buy ISA towards this exchange, it's only at completion that you receive the mortgage money and Help to Buy ISA bonus – so the bonus won't help towards the home exchange deposit.

  So if you're relying on the Help to Buy ISA bonus to get you to 10% (or indeed only have a 5% deposit in total), it could be a problem. However, in most cases, it'll be worth trying to negotiate with the seller (probably via your solicitor) on this.

  Be honest with them about the Help to Buy ISA bonus. If the seller wants the sale to go through, they could agree to a lower deposit (possibly with the right to chase you in court for the full 10% if you later pull out).

  But according to brokers we've spoken to, as long as you are upfront about your reliance on the Help to Buy ISA bonus, it shouldn't be a major issue. Most vendors are unlikely to pull out of a sale because of a small shortfall which will be made good in just a matter of days when you finally complete.
  
  

• The deposit at completion (sometimes called the mortgage deposit): It is this final deposit when you actually become the legal property owner – not the specific exchange deposit described above – which the Help to Buy ISA bonus is for.

  Say you're buying a £100,000 property, and have saved £8,000 in a Help to Buy ISA; with the bonus you'll have £10,000, so a 10% deposit in total. You’d have been able to use your £8,000 at the exchange stage but can only get the additional £2,000 at this point of completion. That helps to reduce the amount you need to borrow and cuts the cost of your mortgage rate too.

This point isn't really about Help to Buy ISAs but, if you've got a lump sum, or you're saving over £200/mth (£400/mth if a couple of first-timers buying together), you'll need to save elsewhere too.

Quite simply, you want to put your cash in the account paying the highest after-tax interest. The personal savings allowance means basic-rate taxpayers can earn £1,000 interest a year without tax, higher rate £500, so for most people tax is no longer such a big issue on where you save. So here are our top tips:

• Earn 5% for one year on up to £2,500. Open a Nationwide FlexDirect account and you get 5% AER fixed for a year on balances of up to £2,500 (1% AER variable after). You can also earn up to 3% with other top interest-paying bank accounts.

• Get up to 2.75% with a regular saver. Some bank accounts also offer customers access to linked regular saver accounts where you can put up to £250/mth with top rates. See Top Regular Savers.

• Easy-access savings accounts pay up to 1.45%. These are good for larger sums and allow you to withdraw cash when you need it. Full info in Top Savings Accounts.