Leanne Riches, Chartered Legal Executive, highlights the 30 November deadline for new Help to Buy ISAs...
Of all the schemes currently in place to help buyers get on the property ladder, the most popular seems to be the Help to Buy ISA, available to First Time Buyers. No new Help to Buy ISA accounts can be opened after 30 November 2019, however there’s still time to open an account and it’s worthwhile doing - even if you are not planning on buying a property in the near future.
A Help to Buy ISA can be opened with any amount up to £1,200. After this, you can save up to £200 in the ISA each month. When you buy your first home you can claim a free £50 bonus from the government for each £200 you have saved. There are no catches on this and it does not have to be repaid - the bonus really is free!
You can claim a bonus on any savings between £1,600 and £12,000, meaning you can claim a bonus of between £400 and £3,000. However, the price of the property you are purchasing cannot be more than £250,000 (or £450,000 if the property is in London).
The bonus must be used towards the purchase price on completion; it cannot be used as the deposit on exchange of contracts or for anything else, such as legal fees or Stamp Duty. Because of this, we usually need to offer a reduced deposit on exchange of contracts with the sellers. This sometimes causes confusion, as mortgage companies refer to the ‘deposit’ as anything other than the mortgage advance, but the deposit in legal terms is the amount paid at the time contracts are exchanged, which is never more than 10% of the purchase price.
Your conveyancer will charge £50 plus VAT for dealing with the Help to Buy ISA admin and will deal with the bonus request for you. All you will need to do is close your account and sign a First Time Buyer Declaration, which your conveyancer will send to you.
Your conveyancer will need your account closing statement in time to request the bonus funds before completion. It is recommended that you close your account before exchange of contracts, in case there are any hiccups with the bank, so that your conveyancer has all required documents in plenty of time. This last point is important, as the bonus cannot be claimed after you have completed your purchase.
Although no new accounts can be opened after 30 November 2019, you can keep saving in the ISA until 30 November 2029 and can claim your bonus until 1 December 2030, so it really is worthwhile opening an account before the deadline, even if you have no plans to buy in the near future.
There are also other schemes in place to assist with property purchases, such as Lifetime ISAs, Help to Buy equity loans and shared ownership schemes. If you have any questions about any of these schemes, Help to Buy ISAs or property purchases in general, I would be happy to help. My telephone number is 01603 724674 or you can email me at email@example.com.