‘Help to Buy’ ISA Scheme
by Andrew Rodgers
In an effort to assist individuals purchasing their first home, the government has now introduced the Help to Buy ISA Scheme.
First time buyers can save a maximum of £200.00 per month, and deposit an initial sum of up to £1,200.00 into an eligible Help to Buy ISA and the government will add a 25% bonus when the ISA balance is put to buying a first home.
The Help to Buy Bonus is available to each first time buyer, not each household. Therefore two partners purchasing their first home could receive a government bonus of up to £6,000.00.
The minimum government bonus is £400.00, requiring an ISA balance of £1,600.00 to have been saved. The maximum government bonus is £3,000.00, requiring an ISA balance of £12,000.00 to have been saved, which would take an individual 55 months, not accounting for interest earned.
The bonus will be available on home purchases of up to £450,000.00 in London, and £250,000.00 outside London.
The Help to Buy ISA offers comparatively high rates, but these are variable and therefore subject to change.
Following its implementation, the Help to Buy ISA Scheme has received some criticism due to the fact that the bonus payment can only be made at the completion of the conveyancing process. The bonus cannot be used for the deposit due on exchange of contract as many first time buyers had assumed, and as marketed by some banks and building societies. Therefore for those struggling to find the initial outlay required to buy their first home, the scheme will not be of direct assistance in meeting these often prohibitive costs.
Conveyancing solicitors have a direct role in obtaining bonus funds from the government. The solicitor will make the application for the bonus on behalf of the client, confirm the client’s eligibility to receive the bonus and that the property being purchased meets the eligibility criteria. This involves submitting the relevant documentation including a payment request, and applying the bonus towards the purchase of the property. Following the completion of the registration of the transfer of ownership of the property at the Land Registry of Northern Ireland, the solicitor will also be required to furnish a copy of updated land certificate to the solicitor portal for the scheme to confirm the property has been transferred. The solicitor may charge the client up to a cap of £50.00 plus VAT to fulfil their role as part of the scheme.
In conclusion, any first time buyer wishing to avail of a bonus from a Help to Buy ISA Scheme should ensure that they are fully aware of the rules governing the use of the bonus in the purchase of their first home, and the time required to build up an ISA balance to achieve a bonus to the level they require. It remains to be seen how effective the Help to Buy ISA Bonus Scheme will be assisting first time buyers, however for those struggling to purchase their first home any assistance is welcomed.