GET IT RIGHT FIRST TIME: Sarah is here to help first time buyers get to grips with the conveyancing process. This month, she explains how you can benefit from the government’s Help to Buy ISA scheme…
First time buyers over the age of 16 can qualify for a Help to Buy ISA.
You can save up to £200 a month towards your first home and the government will boost your funds by 25%, to a maximum of £3,000.
Opening one with any bank, building society or credit union that is registered with the scheme is easy, as long as it is in your name and it can be used in conjunction with a Help to Buy equity loan or mortgage.
The house you are buying cannot be rented out or used as a holiday let, but if your circumstances change in the future, you will not be asked to pay back any bonuses received.
I am buying a house with my girlfriend. Can we both have a Help to Buy ISA?
As long as you are both first time buyers, you can open your own Help to Buy ISAs and claim separately for the government bonuses paid on your savings. Both bonuses can then be put towards the property you are buying.
If you have already paid into a cash ISA in this tax year, you will have to transfer your active funds to the Help to Buy account. This can be any amount, up to £1,200 and the total you save in a year must not exceed the annual subscription limit.
How much can I pay into my Help to Buy ISA?
The maximum you can save every month is £200, but in the first month you can pay in an additional £1,000. You can make as many payments as you like, within the £200 limit.
You don’t have to save this much – the amount is up to you. However, you cannot roll over your allowance, which is allocated per calendar month.
Can I withdraw money from a Help to Buy ISA?
Yes, you can withdraw money at any time, but it is worth bearing in mind, it cannot be put back at more than £200 per month.
If you plan to withdraw all your savings to put towards a property purchase, you will need to let your ISA manager know, so they can close the account and provide a final statement – you need this to claim your government bonus.
The bonus is paid once your house purchase is ready to proceed and will be claimed by your solicitor, between exchange of contracts and completion, to contribute towards your deposit. It is calculated on the amount in your ISA, including savings and interest, up to a maximum of £3,000.
The money is paid directly to your solicitor, who will transfer it with the rest of your funds to the people selling the home you are buying.
How do I claim my bonus?
Your solicitor will apply for the additional money on your behalf and it will be sent direct to them. You must have saved at least £1,600 to be eligible for the minimum £400 bonus.
You can apply for the bonus at any time, but it must be within 12 months of closing the account and before the completion of your property purchase. My advice would be to do nothing until you are confident your transaction is proceeding.
What happens if my purchase falls through after I’ve closed the Help to Buy ISA?
In this situation, you can reopen your ISA.
You will need a letter from your solicitor (called a purchase failure notification) confirming your property did not complete, which you give to your ISA provider to reactivate the account. At this point, you can redeposit your savings as a lump sum. Alternatively, you can put your money into a cash or stocks and shares ISA, without it counting towards your annual subscription limit.
If your bonus has already been transferred to your solicitor, it will need to be returned before you can receive the purchase failure notice. Once you’ve found a new house to buy, you can then start the process again.
If you are a first-time buyer with a question about moving home, our residential property expert, Sarah Gaunt, would love to hear from you. Email: firstname.lastname@example.org.