Taking that first step onto the property ladder has become increasingly difficult in recent years. Having been labelled “Generation Rent” by the Government, first time buyers are now being offered a helping hand in an attempt to transform them into “Generation Buy”. In December 2015, the Help to Buy Individual Savings Account (ISA) was launched, offering a cash incentive to those purchasing their first home. With every deposit into the account, the Government will boost your savings by up to 25%, to the maximum of £3,000. Any interest earned is both income and capital gains tax-free and you can transfer the account between different providers in order to get the best interest rate.
SO HOW CAN I GET ONE?
- OPENING THE ACCOUNT
The first step is to open a Help to Buy ISA through one of the numerous banks and building societies now offering the service. To qualify you must be a first time buyer who has never owned a home or had any interest in a property in the UK or abroad. Furthermore, you must be a UK resident, aged 16 or over, with a valid National Insurance number and no other active cash ISA in operation within the last financial year.
In order to obtain the Government bonus, you must reside within the UK, intend to live in the property you are purchasing and the property must be subject to a mortgage. The value of the property cannot exceed £250,000.00 outside London or £450,000.00 inside London and despite the common misconception; the property does not need to be a new build. The ISA is available to any first time buyer who meets the criteria and the offer is not limited per household, meaning two people purchasing together could receive a cumulative bonus of up to £6,000.
- START SAVING
Once the ISA is open, you can kick-start your savings by depositing a large starter sum of £1,200. After this, the maximum that can be deposited per month is £200, but the amount you chose to save is up to you. You have the option to withdraw money at any time and do not need to put money into the ISA every month, contributions can be made as and when you choose. The Government bonus will be 25% of the amount saved or if your savings exceed £12,000, it is capped at £3,000. The minimum bonus amount that can be claimed is £400 and therefore, you will need to have at least £1,600 in your account before you can claim.
- CLOSING THE ACCOUNT
Once you are close to completing your residential purchase, you must inform your ISA provider that you wish to close your account and instruct your conveyancer to apply for your Government bonus. You will need to provide your conveyancer with the closing statement from your ISA and your conveyancer will also provide you with a First Time Buyer Declaration to complete, sign and return to them. Once your conveyancer is in receipt of the paperwork they can claim your bonus. The funds will be sent directly to your conveyancer and be consolidated with the rest of the completion funds. These monies cannot be used as part of the deposit on exchange of contracts or to pay solicitors fees or disbursements. If the sale doe not go ahead after the bonus has been claimed, your conveyancer can return the funds and provide documentation to allow you to reopen the ISA and have the money deposited as a lump sum.
Louise Jones, Head of Residential property says;
“The Help to Buy ISA is a no-brainer for any first time buyer looking to get onto the property ladder in the immediate future or within the coming years. The Government bonus is effectively money for nothing, as you are rewarded for a saving you would effectively be making anyway.”
With the closing date for the opening of new ISA’s stated to 30 November 2019 and with bonuses needing to be claimed by 1 December 2030, at the latest, there is no better time to take advantage of the ISA.
If you would like more information on Help to Buy ISA’s or would like to instruct us on a Help to Buy assisted purchase, please contact any of our local offices to speak to a member of our Residential Property Team.