As of the start of December 2015, the Government has launched new Help to Buy ISAs, designed to give assistance to people who are trying to save for a deposit for their first home.
It’s an excellent scheme and sees the Government contributing towards your savings to help ‘top up’ your total, so it’s well worth doing.
However, it’s not necessarily easy to do, so here is a handy nine-point guide from the conveyancing team at DMA Law to help you get to grips with the Help to Buy ISA.
Remember, if you get stuck, we are here to help. As point 8 explains, you’ll need to consult your solicitor at some point as part of the process anyway, so feel free to ask us any questions you may have.
- You can save up to £1,200 in your first month, then up to £200 a month after that
The scheme still works if you put in less than £200 a month, but beware: £200 is the absolute monthly limit. You can’t put in £150 in November and then £250 in December, for example.
- The Government adds 25% tax-free to whatever is in the ISA when you use it for a deposit
It’s a great offer, so do take it up if you can. There are some conditions, though. You need to have saved at least £1,600 yourself, which gives you a £400 bonus and £2,000 in total.
Also, the maximum you can use to claim your bonus is £12,000, which gives a tax-free bonus of £3,000 and a total amount of £15,000.
- The offer is open to every first-time buyer aged 16 and over
There is an expiry date on the deal of 2030, so it’s worth starting to save as quickly as possible for the future.
The Government defines a first time buyer as someone who has never owned all or part of a property, either in or outside the UK, regardless of whether it was bought or inherited.
This is about getting new people onto the property ladder and can only be used as such.
- Couples are treated as individuals
If you have enough money, you can have an ISA each. It’s worth considering taking out separate accounts, especially if your deposit is likely to exceed the £12,000 limit.
The only condition is as explained in number 3 – only first time buyers can apply, so if your partner has previously owned all or part of a house, then only you can apply for the Help to Buy ISA.
- It can be used for any property costing less than £250,000 (£450,000 in London)
It can be used with any mortgage type, not just Help to Buy mortgages (though it can be used with those if you wish). Plus, it doesn’t just apply to new build properties. Any property is included in the scheme.
Shop around for your mortgage, too – you don’t need to get your mortgage from the same bank you have your savings account with.
- You can only open one Help to Buy ISA
However, you can swap it between providers to make sure you continue to get the best possible rate. As with any savings products, be wary of rates that are attractive for the first year but which drop off – and make sure you swap if and when they do.
- You need to get your solicitor to apply for the cash bonus when you do buy your home
The Government is obviously keeping very close checks on the money it is giving away, so you’ll need to involve your conveyancing solicitor when it comes to house-buying time.
When you have saved enough and want to close the account, your cash will transfer to your current account. You will then get a final statement from your ISA provider, which you need to give to your solicitor to access the top-up money from the Government. Let your solicitor know in advance that this is what you want to do and keep them informed as you go along.
- You can take the money out whenever you want
You can withdraw the money whenever you want, and you will still receive the tax-free interest that you are due. This might be relevant if you decide to buy a house that is valued higher than the maximum amount, for example, or if you simply change your mind.
- Even if you have already started saving, it’s worth doing.
Assuming you have £1,200 to start with, it only take three months to save the minimum amount (£1,200 + £200 + £200), and it’s worth an extra £400.
