Asking for advice is just as important as saving money
THERE’S been a row in property in recent months. But this one is about how Help
THERE’S been a row in property in recent months. But this one is about how Help to Buy Isas may not be fit for purpose.
If you’re a first-time buyer saving for a mortgage deposit, the Government’s Help to Buy ISAs are a bit of a no-brainer.
You can earn up to 2.27 per cent interest (tax-free) and then the state will add 25 per cent free cash. The government says this could be thousands of pounds on top of what you save.
So with this in mind, for any first-time buyer, the Help to Buy Isa is worth opening.
However, read the small print — you’ll need to save at least £1,600 before the government will give you the 25pc bonus.
Also, there’s a maximum bonus amount of £3,000, which means the maximum amount worth saving in a Help to Buy Isa is £12,000.
It’s worth noting that Help to Buy Isas are available to each first-time buyer, not each house, so if you’re buying a property with your partner you’ll be able to get up to £6,000 towards your deposit.
On top of this, of course, you will also be paid interest. Check the latest bank deals for the highest rate. Help to Buy Isa rates have been on the decline since they were launched. The Halifax used to pay four per cent but now it’s more like two per cent, so grab the best rate while it lasts.
There’s another thing to watch out forâ€¦ As reported in the Daily Telegraph, you will not receive the bonus until “completion”, which means it cannot be used for the initial deposit, so don’t be caught out when you need to pay that 10 per cent of the property’s sale price as an ‘exchange’ down-payment.
There can also be problems if you use the bonus money with the Share to Buy scheme, which allows buyers to pay for a portion of a home upfront and pay for the rest in monthly instalments. Make sure you’re crossed all the boxes.
But what happens if your sale falls through? Don’t worry — if the property sale does not go ahead, just close the account and you can reopen the Isa later. You’ll get the bonus when you eventually complete.
To reopen your Help to Buy Isa your solicitor will need to fill in a ‘purchase failure notification’ — a document that confirms that your property purchase did not complete.
This form needs to be taken to your bank in order for your account to be reopened. Just make sure your bank/solicitor/mortgage adviser/estate agent knows these rules inside and out, as historically, some people have been wrongly advisedâ€¦
Luckily, Henley’s local property experts know what they’re talking about:
Savills’ financial expert Tim Miles-Marsh says: “Government-assisted schemes such as Help to Buy have boosted the number of first-time buyers, making it easier for those with not much in the way of a deposit to get on the housing ladder. The Help to Buy Isa was designed to encourage saving towards a deposit by providing a bonus on top of what the first-time buyer put by. But the small print states that this money can only be accessed at completion and not used for the deposit at exchange of contracts.
“However, this does not mean the scheme is redundant. If a buyer does not have enough cash to pay the usual 10 per cent deposit at exchange without accessing the Help to Buy Isa money, they will have to try and negotiate with the seller so that the latter accepts a smaller amount at that stage. This is what used to happen in the days when people borrowed 95 or even 100 per cent of the purchase price.”
Romans’ sales director Antony Gibson says: “We would always refer any buyer to their solicitor and/or financial adviser to ensure that they correctly understand the terms and conditions of the Help to Buy ISAs and the Share to Buy scheme to ensure that they correctly understand what funds are required and when. However, any scheme which intends to help buyers to buy their own property must be welcomed. We want to see more buyers able to enter the marketplace but as they do start out, having their finances set up correctly is essential and we would always say get expert advice at the earliest stage.”
Penny & Sinclair’s branch manager James Donigan says: “Even if you are buying a house in six months the Help to Buy Isa is a scheme worth doing. Within six months you can deposit a maximum £1,200 in month 1, then a maximum of £200 savings per month; so after six months you would have saved £2,200. The government bonus of 25 per cent would therefore be £550. If you are buying with a partner, both of you can save into a Help To Buy Isa, and after six months would have £1,100 from the government, in addition to your own savings.
“My advice would be to budget thoroughly, seek financial advice and ensure there is a cushion to help with any last-minute unexpected costs. Also, look at the Money Advice Service website which has great information that’s particularly useful for first-time buyers. All relevant information is available on the HMRC website and I recommend to anyone using a government-backed scheme to check the information to avoid complications once the process has begun.”