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In pre-election budget, George Osbourne announced that from this Autumn, first time buyers could benefit from a government initiative which could see first time buyers receive as much as £3,00.00 towards their new home buy opening a Help to Buy ISA.
Under the new Help to Buy ISA scheme the government will ‘top up’ your savings - you can save up to £200 every month and the government will add 25% on top meaning £50 on £200. You can open the ISA with a maximum deposit of £1,000 which will have £250 added on top of it. The ISA’s will be available for four years but can be kept open indefinitely. The minimum you need in the ISA to get the bonus is £1,600 on which you would receive a £400 bonus and the maximum the Government will contribute is £3,000 which means you will have saved £12,000. The ISAs are not limited to one per household so if you are buying with a partner or friend you will benefit from double the cash incentive. The Help to Buy ISA will be available through banks and building societies and rates will be set by them and differ just as with regular cash ISAs.
Question are already being asked as to the advantages of taking up this scheme and we hope that below we can respond some of the common questions here:
Q. When can I open a Help to Buy ISA?
A. The date has not yet been confirmed however we believe it will be during Autumn of this year. Accounts can be opened within four years from the start date of the scheme and once it is open, you can keep it open as long as you like.
Q. Who can open a Help to Buy ISA?
A. You need to be a first-time buyer (which means never having owned a home before) and aged over 16 years old. You also cannot be a first time buyer who intend to tenant their new property.
Q. I'm a first-time buyer but the person I'm buying with isn't. Can I use the scheme?
A. Yes, you can still use the bonus towards the cost of the property - they of course won't be able to open this type of ISA.
Q. What type of home can I buy?
The bonus will only be available on homes worth up to £450,000 in London or £250,000 anywhere else in the UK. There is no restriction on buying a new build property or second hand home.
Q. How will the bonus be paid?
A. The bonus will be calculated and paid when you buy your first home – you'll get a voucher for the bonus which will go straight to your mortgage lender. So you will not get the bonus unless you buy a home.
Q. Does that mean that I’m restricted on what mortgage I take out?
Not at all. You can use any type of residential mortgage deal you want - you're not just restricted to Help to Buy mortgages.
Q. Can I withdraw money without it affecting the bonus?
A. You will only get the bonus on the amount you have in the ISA at the point you purchase a property, so if you withdraw cash you won't get the bonus on that amount you withdraw.
Q. What happens if interest I earn on the balance in the ISA takes me above the maximum £12,000 on which the Government will pay the bonus on?
A. You can only get a maximum £3,000 bonus, so you won't get any more!
Q. Will I have to pay tax on the bonus?
A. No. The Government bonus will be tax-free as with all other traditional ISAs.
Q. I've got money in a standard cash ISA - can I transfer that to a Help to Buy ISA and get the £3,000 bonus?
A. There has been no response on this point as yet but as the maximum initial deposit into the ISA is £1,000.00 it seems extremely unlikely that you will be able to transfer bigger lump sums from a traditional cash ISA and receive the bonus.
If you have any further queries regarding the Help to Buy ISA or if you would like to discuss your first steps onto the property ladder in more detail and obtain an estimate of our legal costs then please do not hesitate to contact our property team at firstname.lastname@example.org or telephone:-
Need advice? Email us email@example.com