You can save up to £1,200 in your first month, then up to £200 a month after that
If you’ve got less, you can put in less and it’ll still work, and you can keep contributing as long as the scheme lasts.
If you miss a contribution one month, it’s not a problem, though you can’t make it up the next month (ie, you can still only put £200 in the next month).
The state adds 25% tax-free to whatever is in the ISA when you use it to buy
If you’re a first-time buyer, you use the ISA to buy your first home, all the money you have put in and the interest will have 25% added to it, with two exceptions:
* You need to have at least £1,600 saved to get the bonus (so you’d get £400 extra)
* The most you’ll get the bonus on is £12,000 (so a £3,000 bonus). The bonus scheme’s set to keep paying out on Help to Buy ISA savings until December 2030.
* Every first-time buyer aged 16 and over can open one
* Anyone can get one, as long as you’re a first-time buyer
* You can open one anytime between 1 December 2015 and December 2019 and you’ll still get the bonus added as long as you use it for a deposit until 2030.
* As for what a first-time buyer is – the definition is strict. It’s someone who doesn’t own and has NEVER owned an interest in a residential property, either inside or outside the UK, whether it was bought or inherited.
* Once children are 16 they can get a Help to Buy ISA and, if you’re looking to help them in future, it’s a potentially lucrative way to do it. You can then give them money to put in it and, if they later use it for a deposit, they get the 25% added on top.
* However, they must open the account, not you.
* It’s an individual product, couples are treated separately
* Help to Buy ISAs are for individuals, it’s not about who’s buying the house, it’s simply about whether you’re a first-time buyer.
* If you’re a first-time buyer, buying with someone who’s owned before, you CAN open one, they cannot
* If you’re a first-time buyer, buying with another first-time buyer, you CAN BOTH open one.
* The bonus will only be available on homes worth up to £250,000, or £450,000 in London (defined as inner and outer London boroughs).
* Unlike some other government schemes, you’re not restricted to buying a new build; any property works – provided you’re buying with a mortgage (you won’t get the bonus if you’re a cash buyer).
* You can use it with any mortgage type, it DOESN’T have to be a Help to Buy mortgage(though it can be), but it must be a residential mortgage, including self-build and shared ownership, but not buy-to-let.
* With shared ownership, that you’ll only get the bonus if the total property price is under £250,000 (£450,000 in London) – it’s not based on the price of the proportion you’re buying. It doesn’t need to be your sole deposit money, you can combine it with other savings (see where to save the rest).
* You’re not tied into getting a mortgage from the same bank you open your Help to Buy ISA with.
* You can only open one Help to Buy ISA, but you can transfer it to up the rate
* Unlike a cash ISA – where you can open a new one each tax year – you’re only allowed one Help to Buy ISA (ie, from one provider) full stop. But you can continue to add to it each tax year.
And although you’re only allowed to get one Help to Buy account, you can transfer it between different providers to chase the best interest rates.
* The rules say you can’t open a cash ISA and a Help to Buy ISA at the same time in the same tax year. Though nothing prevents you opening a Help to Buy ISA if you have cash ISAs from previous years, or a stocks & shares ISA from any year.
* Your maximum ISA allowance per tax year is £15,240 so your combined ISA savings (the amount you put into an ISA) can’t exceed this.
* You need to get your solicitor to apply for the bonus cash when you buy a home
* When you’re ready to buy, to get the bonus, you let your ISA provider know that you’re closing down your Help to Buy ISA account, and transfer the funds into another account (or your solicitor’s account).
* You’ll then receive a closing letter from your ISA provider, which you need to give to the solicitor who is doing your conveyancing (house buying) work for you.
* The solicitor then uses the letter to apply online for the government bonus. Beware! Because it’s admin work, and takes time, solicitors are allowed to charge up to a maximum of £60 (£50 + VAT).
* The Help to Buy ISA bonus only helps with the mortgage deposit, NOT the exchange deposit
* When you’re buying a home there are two types of deposit (though the same money’s generally used for both). And, as the Government decided you’d only get the Help to Buy ISA bonus at completion (so no one could get it if they pulled out of a property sale), it only helps you with one of these types; and it’s important to understand the difference.
* The Home Contract Deposit: During the process of buying a property, after your offer is accepted, once you’ve checked everything out you normally exchange contracts with the seller. At this point the seller will usually ask you to put down a 10% deposit (sometimes it can be negotiated lower to 5%) to secure the property. After that no one else can trump you as both you and the vendor are committed to the sale.
You then have time to work through your finances and any other issues towards completion which is when you and the mortgage company hand over the remainder of the cash
* While you can use the money you’ve saved in a Help to Buy ISA towards this exchange, it’s only at completion that you receive the mortgage money and Help to Buy ISA bonus;so the bonus won’t help towards the home contract deposit
* So, if you are relying on the Help to Buy ISA bonus to get you to 10% (or indeed only have a 5% deposit in total), it could be a problem.
* The deposit at completion (sometimes called the mortgage deposit): It is this final deposit when you actually become the legal property owner – not the specific exchange deposit described above – which the Help to Buy ISA bonus is for.
* Say you’re buying a £100,000 property, and have saved £8,000 in a Help to Buy ISA; with the bonus you’ll have £10,000, so a 10% deposit in total. You’d have been able to use your £8,000 at the exchange stage but can only get the additional £2,000 at this point of completion. That helps to reduce the amount you need to borrow and cuts the cost of your mortgage rate too.
* If you decide not to buy your first home (or to buy one costing more than the qualifying amount) you don’t lose the money. You can take money out of a Help to Buy ISA whenever you want – you just miss out on the bonus. It’ll still be tax-free and you’ll still get the interest you’re due.
* The rules also allow you to make partial withdrawals, while keeping the Help to Buy ISA open (though withdrawal rules will depend on your provider). You won’t be eligible for the bonus on the amount withdrawn, but you can still keep contributing afterwards and will still get the bonus on whatever is in the account when you use it for a deposit.
d a huge upside if you do.
* It’s worth doing even if you’re buying soon and have already saved
The minimum amount you need to get a bonus is £1,600 (you would get £400) and while that takes ‘three months’ to do, in practice you can do it far quicker with most accounts. The reason it’s three months’ worth is because you can deposit £1,200 in month one then up to £200 in each subsequent month.
* Yet as a month is a calendar month, in practice you may be able to do this far more quickly, if the dates fall for you.
For example you could put £1,200 in on 31 January, then £200 in during February, and the final £200 in on 1 March just 30 days later and you’d be ready to go
* A new Lifetime ISA launches in April 2017 – but don’t wait
The Lifetime ISA (LISA) is due to launch in April 2017, and just like the Help to Buy ISA, it will give a 25% bonus on top of what you save. It’s called a Lifetime ISA as it’s designed both to help you buy your first home, and to save for retirement.
The main difference is that you can save £4,000 a year in a Lifetime ISA, compared with £2,400 (£3,400 in year one) in a Help to Buy ISA. The bonus is also paid differently – with a Lifetime ISA you can get a maximum of £1,000 – 25% of the max £4,000 saving – paid at the end of every tax year. So how do the two interact?
* You can have both Help to Buy ISA and a Lifetime ISA
* However you can only use the bonus from one of them towards buying a house.
* Use the LISA for the 25% bonus to buy a home, you won’t get the bonus with the Help to Buy ISA, but you can still keep the money plus the interest (and use it towards buying your home).
* Use the Help to Buy ISA for the 25% bonus, and you’d have to pay a penalty to use your LISA savings for a property, though you would still be able to use it and get the bonus for retirement
John P Hagan / JPHLAW Solicitors offer a full range of legal services including Conveyancing Tax Commercial Criminal Family Law Divorce Wills Probate Immigration Notary Public from offices in Portadown serving all of County Armagh and Belfast
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