Getting on the property ladder is a daunting task for many first-time buyers, saving a substantial amount of money for a deposit is challenging but with the new government ‘Help to buy ISA’ you can boost your saving potential by 25%, for every £200 you save the government will pay a bonus of £50 (up to a maximum of £3000)How do I do this?
Help to buy ISA’s are available from a range of high street banks and building societies and credit unions. One of the benefits of the scheme is it is available to each first-time buyer, this means that if you are planning to buy with a partner you can both receive the bonus gaining an additional £6000 towards your deposit.
Save up to £200 a month into your Help to Buy: ISA. To kickstart your account, in your first month, you can deposit a lump sum of up to £1,200.
The minimum government bonus is £400, meaning that you need to have saved at least £1,600 into your Help to Buy: ISA before you can claim your bonus. The maximum government bonus you can receive is £3,000 – to receive that, you need to have saved £12,000.
When you have saved your deposit and are ready to buy your first home you will need to instruct a solicitor to carry out the application for your bonus on your behalf, this will be received on completion to consolidate the funds needed to purchase this cannot be used before completion to pay for any indirect cost associated with buying your home such as solicitor fee’s or estate agent costs.How can I find out if I’m eligible?
The basic criteria is as follows:
- You must be 16 or over
- Have a valid national insurance number
- Be a resident in the UK
- Be a first time buyer (including overseas property)
- Not have another active cash ISA in the same tax year – if you have opened another cash ISA this tax year you can open a help to buy ISA but will need to take additional steps.
To qualify for the bonus the property you are buying must fit the following criteria:
- Be in the UK
- Have a purchase price of up to £250,000 (£450,000 in London)
- Be the only home you will own
- You intend to live in the property
- Be purchased with a mortgage
The Help to buy ISA can be used in conjunction with other government schemes such as the help to buy equity loan scheme and shared ownership.FAQ
How long will the help to buy ISA be available for:
- According to the government the scheme will be available until 30th November 2019 where the scheme will be closed to new savers, however existing savers can continue to save until 30th November 2029 and your bonus must be claimed before 1st December 2030.
Am I considered a first time buyer?
- A first time buyer is someone who does not own and has never owned a property anywhere in the world.
Can I open a help to buy ISA on behalf of anyone else?
- No, the help to buy ISA’s cannot be opened on behalf of someone else.
Can I open a help to buy ISA with anyone else?
- No, you must open accounts individually, if you intend on buying with someone else you will need to save separately. If the property you wish to purchase is within the price caps you can separately claim the government bonuses due on your savings and put both bonuses towards the home you are buying.
If I own a property in trust am I still a first time buyer?
If you have or had an ongoing beneficial interest in a residential property via a trust, (including a trust created by a will or divorce), then you are not a first time buyer.
However, you are still a first time buyer if:
- You are named as a beneficiary of residential property in the will of a person who is still living; or,
- If the trust to which you are or were a beneficiary was only created for the purpose of selling the property and other assets following a death or divorce, and the title of the residential property was never transferred to your name or to a trust which you are an ongoing beneficiary; or
- If you are only acting in a trustee role and will not be entitled as a beneficiary in the future, (and do not have any other interests in residential property).
I already have a cash ISA can I open a help to buy ISA also?
- If you have already paid into a cash ISA this tax year, then you will need to transfer your active cash (up to £1200) into a help to buy ISA. Any amount over £1200 will need to be transferred into either a stocks and shares ISA, an innovative finance ISA, Lifetime ISA or a non ISA account – however the total amount saved must not exceed the annual subscription limit for ISA’s.
Alternatively, some ISA managers offer portfolio ISA’s which allow you to hold multiple ISA products within a cash ISA wrapper. In this instance it would be best to speak to an ISA manager to discuss options.What is the maximum amount I can save? And do I have to save the maximum to receive the bonus?
- The maximum amount that you can save with a Help to buy ISA is 200 per month.
- You can save as much as you like up to £200 per month however you cannot roll over the allowance.
Can I make multiple deposits into the account during the month?
- Yes, you can providing it doesn’t reach the £200 limit.
Can I withdraw money from the ISA?
- Yes, however you cannot deposit the money back in, within the same month, you will have to wait until the following month.
- You must let your manager know if you plan to withdraw all the money from the ISA as they will need to provide you with a closing statement so that you are entitled to claim your bonus. There are however exceptions should you withdraw your money and the sale of the property falls through.
When is the help to buy bonus paid?
- Your solicitor will claim the bonus between exchange and completion.
- If you are in the situation where you need the government bonus to make up the deposit on exchange of contracts, then your solicitor or conveyancer will be able to advise you on your options. In this instance your solicitor or conveyancer should be able to agree a smaller deposit at exchange with the seller; with the promise of the government bonus to follow as part of the overall deposit.
Will my bonus contribute towards the deposit I need to buy my first home?
- Yes the bonus does contribute towards the overall deposit needed for your home, this will be taken into account when calculating how much you can borrow.
Will the interest on my savings be counted towards my bonus?
- The amount of bonus you will be entitled to will be calculated when you close the account, this will include both the savings and interest earned on the savings. However, you will not earn interest on the government bonus.
Ok I’m ready to apply, how do I do this?
- When you find your home, you will be asked by the lender to instruct a solicitor to take care of the legal work associated with the purchase, You will need a closing statement from the ISA manager to give to your solicitor to enable them to claim your bonus on your behalf, the bonus will then be sent to the conveyancer ready for exchange and completion.
How much will it cost me to instruct the conveyancer to process my bonus application?
- The conveyancer or solicitor cannot charge more than £50 plus VAT to process the application for you.
What if I want to buy a home before I have saved enough to claim the £3000 bonus?
- You must save at least £1600 to claim the minimum £400 bonus from the government, if you close your account before you save the minimum £1600 you will not be entitled to any bonus.
How long after closing my account can I claim my bonus?
- You have 12 months from closing your account to claim your bonus, so its important to not close your account until you are confident that you are about to buy your home.
My house purchase has not proceeded to completion- what do I do?
- You can re-open your account, but you will need a document from your solicitor called a ‘Purchase failure notification’ confirming the property did not complete. Take this document back to your ISA manager and the account can be re-opened for you. You can deposit your money back in as a lump sum.
Is my property eligible for the London price cap?
- A map of the London boroughs that are eligible for the £450,000 price cap can be found HERE
Do I have to live in the house that I buy using my help to buy ISA?
- This must be your only home and cannot be used as a rental property or holiday home. However, there are exceptions for members of the armed forces, if you are unable to use your home when you purchase it you are able to rent it out until you can.
What happens if my personal circumstances change after I have received my bonus?
- The government accepts that circumstances change which may mean you would need to rent out your property in the future. The government is clear that they will not claim back the bonus if personal circumstances change however if the person claims the bonus and has no intention to make the property their main residence then the government will seek to claim back the bonus.
If I am buying a shared ownership property can I claim the bonus still?
- Yes, providing all other criteria are met.
What is the price cap for shared ownership properties?
- The property price cap in these instances is the full sale price of the property rather than just the share that you initially buy. You should speak to your conveyancer who can advise you in more detail and calculate if the property is eligible.
Can I use the Help to buy ISA scheme to buy land to build my own home?
- Providing you meet the criteria, you can use the bonus to purchase land to build your first home. You cannot however, use the scheme to build a home on land you already own.
I own undeveloped land or agricultural land, am I a first time buyer?
- Yes, if you own land that has never been developed and is not in the process of being developed you may still be classed as a first time buyer.
Can I buy a property without a mortgage and still use the help to buy ISA scheme?
- No the property must have a mortgage to qualify.
This information has been taken from the government Help to buy website, for more information please click HERE.
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