For those who are thinking of buying their first property the government has launched the Help to Buy ISA scheme.
This is a tax free cash savings plan with attractive rates of interest offered by banks. On top of the interest received, if the money is withdrawn for the purpose of buying a first home the government is offering a 25% bonus subject to terms and conditions.
Two buyers can both benefit from this bonus on their respective Help to Buy ISA savings if buying the same property.
We think this is a very positive step for first time buyers and are delighted to announce that Donnelly & Elliott is an “Eligible Conveyancer” for the purposes of the Help to Buy: ISA Scheme, meaning that we are authorised to apply for your bonus payment when you buy a property.
HM Treasury is offering a 25% bonus of the closing balance in your ISA which includes the money you have deposited into your account as well as any interest. You should note that you will need to have saved at least £1,600.00 into your ISA before you can claim the minimum bonus of £400.00. The maximum government bonus that you can receive is £3,000.00 which will be achieved if you manage to save £12,000.00 into your ISA. Since you can save a maximum of £200.00 per month this would represent approximately five years’ worth of savings. This period would be reduced if you make an initial deposit into the ISA which can be up to £1,000.00.
We have a password to access an online portal. This allows us to apply for your bonus payment. The portal opened on the 1st February 2016. We have already made the first successful application on behalf of a client and funds were released in three working days, although in some instances, it may take longer to receive the funds.
There is a procedure for obtaining the funds quickly if necessary.
The application should not be made until the conveyancing process is underway and good progress has been made. It can take up to five business days for the application to be processed and up to fifteen business days for the funds to be transferred to our client account. Obtaining confirmation of your eligibility for the bonus will be necessary before you exchange contracts. Once we have requested your bonus it will be held in this firm’s client account until completion of the purchase of your property. This must take place within three months of our receiving the funds or we will have to send the funds back to the Treasury and re-request them before completion.
Why do I need you to make the bonus claim on my behalf?
The scheme requires a solicitor to confirm your eligibility to receive it. To assist you in doing this we will need the following:
We recommend that you don’t withdraw the money until you have spoken to us for advice on your position. We are pleased to offer an initial discussion about this free of charge.
The scheme allows us to charge £50.00 plus VAT for the work involved in submitting your application for your bonus.
No. The funds will be held by us and put towards the purchase price of your new home on completion.
You will need to provide us with a deposit to be handed over on the exchange of contracts, normally 10% of the purchase price.
The property must be in the United Kingdom and must cost no more than £250,000.00 or £450,000.00 if it is in London.
Yes. A full list of all of the criteria is outside of the scope of this article but you would have to live in the home that you are buying (it cannot be rented out or used as a holiday home). There is a slight exception if you are a member of the Armed Forces or spouse or civil partner of somebody in the Armed Forces.
You must buy a property with a mortgage.
The bonus monies would be returned to HM Treasury and you would not receive them. You would be able to either keep your savings and the interest earned on your ISA or put the money back into an ISA so that the bonus payment can be requested if you find another property to buy.
The rules on ISA’s generally are set to change in April 2016 so that you can put back into any ISA the same sum that has been removed during a tax year up to your annual allowance. There are separate scheme rules for the HTB ISAs which normally state that the ISA provider is required to put the money back into the scheme within 1 year of withdrawing the funds, if a house is not purchased and you request that they do so. If in doubt, ask your ISA provider for more information.
Date article written: 01 February 2016
The information contained in this article is accurate at the date of writing. It is written for general guidance only and is not a substitute for obtaining legal advice on your position. We do not accept any responsibility for innaccurate interpretation or application of the information contained in it. Please do contact one our Conveyancing team if you are considering buying a property with the benefit of a Help to Buy Bonus payment.
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