Withdrawing from Help to Buy ISA

danmc182

Hi all,

Apologies if this has already been discussed, but I couldn't find anything specific, or clear to my query.

I have approx £7k in a Help to Buy ISA, but have a similar amount of credit card debt, which I'd like to get rid of.

My question is, if I withdraw from the Help to Buy ISA to pay off the debt, do I lose all the accrued 'bonus' on the ISA? Would I have to start again with the £200 max per month? Or could I replenish quickly (e.g. £500 per month) and retain the bonus that I've achieved to date?

I'm very reluctant to lose the bonus, but equally I'd like the credit card debt paid off.

Any advice would be appreciated.

Many thanks

Wildsound

You would lose the bonus. As you can only pay in £200 a month, it would take you X amount of months to get back where you started.

The flip side is, if you're able to accrue £4,000 before the end of the tax year, and you don't intend on buying a house in the next year, you could open a Lifetime ISA and then contribute to that instead. You would gain access to the instant 25% government bonus and it gives you more flexibility.

Flobberchops

Well, technically you haven't yet gained the bonus in the HTB ISA, that's only given at completion.


As Wildsound mentions, you have instant access to withdrawing the money, but when it comes to replacing the money you're still limited to £200 per month. So, it would take you about 3 years to get the balance back to £7000. I would have a serious think about that.

Alexland

If you close the HTB ISA (as opposed to just making a withdrawal) your provider should give you a closing statement which can be used by your solicitor within 12 months to claim the bonus. See FAQ weird hyperlink below:

https://www.helptobuy.gov.uk/help-to-buy-isa/faq/#f79a24ea-e1f7-648f-8ce9-ff0000ad17aa

Alex.

eskbanker

danmc182 wrote: »

My question is, if I withdraw from the Help to Buy ISA to pay off the debt, do I lose all the accrued 'bonus' on the ISA? Would I have to start again with the £200 max per month? Or could I replenish quickly (e.g. £500 per month) and retain the bonus that I've achieved to date?

I'd suggest you consider the bigger picture and in particular the role of the implied £500 per month available in future.

If your starting position is debt equals savings, i.e. zero net assets, then this isn't a good place to be if looking to buy a first property, as you should have a deposit available without borrowing it, and will need to source a mortgage from a lender.

If you're going to have a monthly £500 surplus going forward then it may be more effective to use that to pay down the credit card debt rather than raiding your HTB money, but you'll need to calculate how it balances out, especially bearing in mind the HTB bonus versus the interest burden on the card debt, or if you can get it shifted to 0% perhaps?

If, on the other hand, your £500 figure was just a notional example and you won't actually be able to save that (or repay that amount of debt) each month, then you may need to recalibrate your plans altogether....

redux

Unlike some other ISA accounts, you can't temporarily withdraw then replace the funds faster.

But as the bonus only comes when you cash in the account to buy a house, I'd suggest you think of the bonus as postponed, rather than foregone.

Could you apply for a new card with a 0% balance transfer offer, to cover some of that card balance? Then do new spending on the old card, avoiding interest on both. Then you could cover the rest of the old card balance from the ISA, and be building that back up at £200 a month.