What is a Help to Buy ISA?

LAURUS LIFE | Finance

What is a Help to Buy ISA?

LAURUS LIFE | Finance

Getting your foot onto the housing ladder

——

Trying to get a foot onto the housing ladder in the UK can be difficult. To help first-time buyers achieve this goal, the government launched a number of Help-to-Buy schemes, including the Help to Buy Individual Savings Account (ISA). These accounts are designed to provide you with a boost to your mortgage deposit savings. Under the scheme, the government would add 25 percent to your savings - up to a maximum contribution of £3,000.

The Help to Buy scheme came to an end on 31st November 2019. Keep reading to find out more about how it worked. 

How does a Help to Buy ISA work?

  

Help to Buy ISAs were available from a variety of banks, credit unions, and building societies. You could make a deposit in order to open your account and the maximum amount you could contribute to your first payment was £1,200. After this, you were allowed to transfer up to £200 a month into your ISA.

The minimum bonus available from the government was £400, and you needed to save at least £1,600 before you could claim any money under the scheme. To receive the biggest possible government contribution of £3,000, you had to save £12,000. If you started off with the maximum deposit and saved £200 each month, it would have been taken you just over four and a half years.

Help to Buy ISAs were open to each first-time home purchaser, not each household. This means that if you planned to buy a home with your partner, for example, you could have both benefited from the government bonus of up to £3,000 - and receive a combined total of £6,000.

It’s important to be aware that the government bonus would be paid when you buy your home, so don’t expect the money to be added to your account before this point. When you’re getting ready to buy your first home, you would instruct your conveyancer or solicitor to apply for the government bonus on your behalf. Once they receive this money, it would be added to your existing savings.

The bonus has to be included with the funds used to complete the property transaction. It can’t be used to pay the deposit due when you exchange contracts or to pay for estate agent’s fees, solicitor’s fees or any other costs associated with buying a home.

When you make a mortgage application, the lender will factor in the money you are due to receive as a government bonus when they are calculating the amount they are prepared to lend to you.

How does a Help to Buy ISA work?

  

Help to Buy ISAs were available from a variety of banks, credit unions, and building societies. You could make a deposit in order to open your account and the maximum amount you could contribute to your first payment was £1,200. After this, you were allowed to transfer up to £200 a month into your ISA.

The minimum bonus available from the government was £400, and you needed to save at least £1,600 before you could claim any money under the scheme. To receive the biggest possible government contribution of £3,000, you had to save £12,000. If you started off with the maximum deposit and saved £200 each month, it would have been taken you just over four and a half years.

Help to Buy ISAs were open to each first-time home purchaser, not each household. This means that if you planned to buy a home with your partner, for example, you could have both benefited from the government bonus of up to £3,000 - and receive a combined total of £6,000.

It’s important to be aware that the government bonus would be paid when you buy your home, so don’t expect the money to be added to your account before this point. When you’re getting ready to buy your first home, you would instruct your conveyancer or solicitor to apply for the government bonus on your behalf. Once they receive this money, it would be added to your existing savings.

The bonus has to be included with the funds used to complete the property transaction. It can’t be used to pay the deposit due when you exchange contracts or to pay for estate agent’s fees, solicitor’s fees or any other costs associated with buying a home.

When you make a mortgage application, the lender will factor in the money you are due to receive as a government bonus when they are calculating the amount they are prepared to lend to you.

Do I qualify for a Help to Buy ISA?

  

In order to qualify for one of these accounts, you must be a UK resident and aged 16 or over. You must also have a valid National Insurance number, be a first-time buyer and not own a home anywhere in the world.

You can only use the scheme to purchase homes worth under £250,000 (or £450,000 if you’re buying in London), and these ISAs are not intended to help you buy a home that you plan to rent out.

Also, you can’t open more than one Help to Buy ISA. And, if you have paid money into a normal cash ISA this tax year and you want to open a Help to Buy ISA, you will need to transfer your cash ISA to a Help to Buy ISA. You’re allowed to transfer up to £1,200 in this way. Any money above this should be shifted into stocks and shares ISA, Lifetime ISA, Innovative Finance ISA or a non-ISA savings product.

Do I qualify for a Help to Buy ISA?

  

In order to qualify for one of these accounts, you must be a UK resident and aged 16 or over. You must also have a valid National Insurance number, be a first-time buyer and not own a home anywhere in the world.

You can only use the scheme to purchase homes worth under £250,000 (or £450,000 if you’re buying in London), and these ISAs are not intended to help you buy a home that you plan to rent out.

Also, you can’t open more than one Help to Buy ISA. And, if you have paid money into a normal cash ISA this tax year and you want to open a Help to Buy ISA, you will need to transfer your cash ISA to a Help to Buy ISA. You’re allowed to transfer up to £1,200 in this way. Any money above this should be shifted into stocks and shares ISA, Lifetime ISA, Innovative Finance ISA or a non-ISA savings product.

How do I use a Help to Buy ISA?

  

If you’re wondering how to claim a Help to Buy ISA, your first step is to apply for an account with a bank, building society or credit union that offers these products. The interest rates available on these accounts differ and are set by each individual provider, so it pays to shop around to find the best deal. Price comparison websites can be a good place to start.

Be aware that you have the freedom to switch between providers whenever you like in search of the best interest rates. The rules for transferring between providers are the same as for cash ISAs. This means you’ll need to make sure you go through the proper procedure so that you don’t accidentally withdraw your money instead of transferring it.

When it comes to claiming your government bonus, you must do this through your conveyancer or solicitor when you’re buying a home. This happens after the exchange of contracts but before completion. If you get the timing wrong, you could miss out on the government contribution. So, make sure you instruct your legal representative to apply for this money as soon as your offer has been accepted.

How do I use a Help to Buy ISA?

  

If you’re wondering how to claim a Help to Buy ISA, your first step is to apply for an account with a bank, building society or credit union that offers these products. The interest rates available on these accounts differ and are set by each individual provider, so it pays to shop around to find the best deal. Price comparison websites can be a good place to start.

Be aware that you have the freedom to switch between providers whenever you like in search of the best interest rates. The rules for transferring between providers are the same as for cash ISAs. This means you’ll need to make sure you go through the proper procedure so that you don’t accidentally withdraw your money instead of transferring it.

When it comes to claiming your government bonus, you must do this through your conveyancer or solicitor when you’re buying a home. This happens after the exchange of contracts but before completion. If you get the timing wrong, you could miss out on the government contribution. So, make sure you instruct your legal representative to apply for this money as soon as your offer has been accepted.

When is the Help to Buy ISA end date?

  

Help to Buy ISAs ended on 30th November 2019. After this, the scheme will no longer be accessible to new savers. However, as long as you open your ISA prior to this date, you will be able to keep saving into your account. You will have to claim your bonus by 1 December 2030 though.

Are Help to Buy ISAs worth it?
While Help to Buy ISAs aren’t right for all first-time buyers but were extremely helpful to many. The amount you were able to save in these accounts each year was considerably less than it is in a cash ISA (which has a limit of £20,000 in the tax year 2018-19). However, the 25 percent bonus that you are awarded by the government was still well above the interest you would earn in a regular cash ISA.

Also, opening a Help to Buy ISA doesn’t mean you were restricted to saving a maximum of £200 a month towards your first home. You could also put money into a top-rated savings account in addition to contributing to your Help to Buy ISA, meaning you can build your deposit up more quickly.

When is the Help to Buy ISA end date?

  

Help to Buy ISAs ended on 30th November 2019. After this, the scheme will no longer be accessible to new savers. However, as long as you open your ISA prior to this date, you will be able to keep saving into your account. You will have to claim your bonus by 1 December 2030 though.

Are Help to Buy ISAs worth it?
While Help to Buy ISAs aren’t right for all first-time buyers but were extremely helpful to many. The amount you were able to save in these accounts each year was considerably less than it is in a cash ISA (which has a limit of £20,000 in the tax year 2018-19). However, the 25 percent bonus that you are awarded by the government was still well above the interest you would earn in a regular cash ISA.

Also, opening a Help to Buy ISA doesn’t mean you were restricted to saving a maximum of £200 a month towards your first home. You could also put money into a top-rated savings account in addition to contributing to your Help to Buy ISA, meaning you can build your deposit up more quickly.

Copyright © 2019 Laurus Homes THT Developments Ltd.  Registered in England and Wales: no. 9201999

Connect with us
 
Copyright © 2019 Laurus Homes THT Developments Ltd.  Registered in England and Wales: no. 9201999