Help to Buy ISA

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Help to Buy ISA – Who qualifies and how do I apply?

You need to be a first-time buyer and the property you are purchasing needs to cost less than the house price cap of £250,000 or less (or £450,000 or less in London).

You can open an account with any bank, building society or credit union that offers a Help to Buy: ISA account.

How long will Help to Buy: ISAs be available for?

You’ll be able to open a Help to Buy: ISA until 30 November 2019. After that date, they won’t be available to new savers anymore – but if you opened your Help to Buy: ISA before then you can keep saving into your account until 30 November 2029 when accounts will close to additional contributions.

You must claim your bonus by 1 December 2030.

ISAs must be opened by individuals aged 16 years and over and cannot be opened on behalf of someone else. ISAs are only available to individuals. If you plan to buy a home with someone else who is also a first-time buyer, they can open and save money into their own account. 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.

I have property in a trust, do I still qualify as 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:
(a) you are named as a beneficiary of residential property in the will of a person who is still living; or,
(b) 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
(c) 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).

Is there a limit on how much I can save in a Help to Buy: ISA?

Yes. The maximum amount you can save every month is £200. In the first month, you can save an additional £1,000.

Do I have to save £200 every month?

No. You don’t have to save money every month and the amount you save into the account every month is up to you – as long as you don’t go over £200. However, you can’t roll over your allowance.

For example, if you don’t save any money during January and February, this doesn’t mean you’re allowed to save £600 during March.

Can I withdraw money from my Help to Buy: ISA?

Yes. You can withdraw money from your Help to Buy: ISA account at any time. But you can’t put all the money you’ve withdrawn straight back into the account – you’re still only able to save up to £200 in every month. For example, if you deposit £200 and then withdraw £50 in the same month, you will have to wait until the next calendar month to make another deposit.

If you plan to withdraw all your money in your Help to Buy: ISA for your home purchase, you will need to let your ISA manager know. Your ISA manager will then close your account and provide you with a closing statement. Don’t just withdraw all of your money as you will not receive the closing statement and you won’t be able to claim your bonus.

There are exceptions if you withdraw your money in order to purchase a home and the sale falls through.

Does the Help to Buy: ISA bonus contribute towards the deposit I need to buy my first home?

Yes. The government bonus contributes towards your overall deposit (sometimes referred to as the ‘mortgage deposit’) and therefore increases your savings for your first home. When calculating the size of your mortgage, banks, building societies and credit unions will seek evidence of the funds that you have available to put towards your first home. This will include the amount that has been saved into your Help to Buy: ISA account and banks, building societies or credit unions will factor in the amount of the government bonus into their calculation of how much you need to borrow.

What is the difference between an exchange deposit and a mortgage deposit?

A ‘mortgage deposit’ is the amount you are contributing towards your first home upfront. For instance, you may pay 5% of the value of the property upfront and borrow the remaining 95% from a bank or building society.

An ‘exchange deposit’ is the money your conveyancer pays to the seller’s conveyancer at the point of exchanging signed copies of the contract.

Can I use the money I have saved in my Help to Buy: ISA for the deposit at the exchange of contracts for my home purchase?

Yes. If you plan to use the money you have in your Help to Buy: ISA to pay for the deposit at exchange of contacts you will need to let your ISA manager know. Your ISA manager will then close your account and provide you with a closing statement. You can then withdraw your savings from your account and use those savings towards the deposit at the exchange. It is important that you don’t just withdraw your savings without getting a closing statement. The government bonus will be paid out just prior to completion and contribute to the overall deposit.

Will my interest on my savings count towards my government bonus?

Yes. Your government bonus will be calculated based on the amount of money you have in your account when you close it. This includes both the money you have saved and any interest you have earned on that money. The maximum government bonus is £3,000.

Will I get interest on my government bonus?

No. Your government bonus won’t be paid into your account. Just prior to completing on your first home purchase, your solicitor or conveyancer will apply for your bonus. Once they receive the bonus, they will transfer it to the seller with the other money you are putting towards your new home.

How do I apply for my bonus?

When you find your home, your prospective mortgage lender will ask you to hire a solicitor or conveyancer. They will handle all of the legal aspects of buying your home and can advise you on whether the property you are buying is eligible for a government bonus. In order to claim a bonus your conveyancer will need a closing statement from your Help to Buy: ISA account. So when you need to withdraw all of your funds make sure you close your account and get a closing statement from your ISA manager. Don’t just withdraw all of your money as you will not receive the closing statement and you won’t be able to claim your bonus. If you lose your closing statement, your ISA provider will be able to give you a new one. You will need to take this closing statement to your solicitor or conveyancer so that they can apply for your bonus.

Your conveyancer will apply for your government bonus on your behalf. The bonus will be sent to your conveyancer or solicitor to be included with the other funds which have been consolidated for the completion of the property transaction.

If completion is imminent, there is an expedited bonus application process that your solicitor or conveyancer can follow that does not require a closing statement. You should speak to your solicitor or conveyancer to find out more.

How do I apply for a Help to Buy: ISA government bonus if I am exchanging and completing on the same day?

Your conveyancer will still use the standard bonus application process, but it will be important that you speak to your ISA manager and solicitor or conveyancer as early as possible to inform them that you wish to claim a government bonus.

There is an expedited bonus application process that your solicitor or conveyancer can follow that does not require a closing statement and where an up-to-date Help to Buy: ISA account statement can be used instead.

When is the Help to Buy: ISA government bonus paid?

The government bonus is paid once it is certain the transaction will go ahead. This means that your solicitor or conveyancer will claim the bonus between exchange and completion. The government bonus contributes towards your completion funds (sometimes referred to as the ‘mortgage deposit’)

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.

What about if I want to buy a home before I’ve saved enough to claim the £3000 bonus?

You need to save at least £1,600 to receive the minimum government bonus of £400. If you close your account without saving that amount you will not receive a bonus. If your Help to Buy: ISA has a balance of £1,600 or more, you can apply for your bonus at any time.

What happens if my house purchase does not go ahead?

If your property purchase doesn’t go through after you have closed your Help to Buy: ISA in anticipation of claiming a bonus, you can re-open your Help to Buy: ISA. To do this your solicitor or conveyancer will give you a document (called a purchase failure notification) confirming your property purchase did not complete. If you take this to your bank, building society or credit union, they will re-open your account for you. At this point, you will be able to deposit your money as a lump sum. So, if you closed your account with £12,000 in it, you will be able to re-deposit £12,000. If you decide not to re-open a Help to Buy: ISA, you can use your purchase failure notification to deposit your lump sum in a cash or stocks and shares ISA. This will not count towards your annual ISA subscription limit.

If the government bonus has already been transferred, your solicitor or conveyancer will first need to return your bonus to the Help to Buy: ISA Scheme Administrator before you can receive a purchase failure notice.

 

Call The Law Practice today for further advice on your first home purchase. Contact us today.

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