Get up to £3000 free with a Help to Buy ISA if you're a first time buyer

What is a Help to Buy ISA?
This is an ISA where you can earn up to 3% interest tax-free if you're a first-time buyer saving for a mortgage deposit. The government will add 25% free cash when you close your account to buy a house, and you can get this bonus on anything up to £12000 so you'll get £3000 free maximum which is pretty good.

How does it work?
You can deposit up to £1200 in the first month after opening your account, then up to £200 a month after that, although you don't need to maximise your contributions and if you don't put anything in for 6 months you can't deposit any extra the 7th month. You need to have at least £1600 (3 months contributions) saved to get the bonus, and to get the maximum government bonus it will take 55 months of saving, or around 4.5 years, which means this is a great time to open one if you don't already have an ISA this year. In theory you can't open a cash ISA and a Help to Buy ISA at the same time in the same tax year but you can open one if you have ISAs from previous years.

Will it be useful to you?
You can open a help to buy ISA as long as you do not own and have never owned an interest in a residential property (it doesn't matter if you inherited or bought it), and you're over 16. If you're buying a house jointly with another first time buyer you can both open a Help to Buy ISA and save £400 a month. It can be used for any property that costs less than £250,000 (£450,000 in London) and any residential mortgage so it can't be for buy-to-let but if your circumstances change down the line you can rent it out. You don't need to get a mortgage from the same bank.

How do you actually get the bonus?
I was quite confused about this as the bank providing my Help to Buy ISA was not very clear in their terms and conditions about how you actually close the account and get the bonus from the government. Essentially when you have had an offer accepted for a house and are ready to buy/will be transferring the money to your solicitor soon, you need to let your ISA provider know and close down your Help to Buy ISA account (do not just withdraw the money then close it), this is so that your ISA provider will give you a closing letter. You then give this closing letter to your solicitor or conveyancer so that they can apply for the bonus. If you withdraw all the money rather than closing the account then you will not receive the closing letter and so you won't get the bonus. If you're going to complete on your sale soon there is an expedited bonus application process.

Your solicitor will probably charge you extra for applying for the bonus but they cannot charge more than £50+VAT for processing the application. The bonus needs to be claimed within 12 months of closing your account and you cannot buy a property without a mortgage if you want to be eligible for the government bonus (I'm not sure if you could potentially get a very small mortgage for this purpose? A lot of the time buying outright is a worse choice anyway),