Managing your Help to Buy ISA

07/02/2018
Managing when to cash in your Help to Buy ISA can be tricky and the process is far from simple. Getting it wrong could mean that you forfeit the Government's contribution and leave you feeling very annoyed. The guidelines and rules are full of caveats that could affect whether you actually can use your bonus especially if you are thinking of using your Bonus to fund your deposit (you can't do this - read on to find our why). This article provides advice on how to claim your Help to Buy ISA bonus and at what time during the conveyancing process you need to cash it in.

IMPORTANT: You cannot use your ISA to fund your exchange deposit!

The Help to Buy: ISA bonus must be claimed on your behalf by a solicitor or conveyancer in anticipation of the completion date. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home. Read the full Help to Buy ISA terms and conditions.

The Government has confirmed that a direct cost for which you can use your bonus to pay for is the cost of the purchase price and nothing else.

Read on to find out:

  • What can you spend your Help to Buy bonus on (including lists of inclusions for London boroughs)?
  • When should you close down your Help to Buy ISA?
  • How to cash in your Help to Buy ISA?
  • What to do if you were planning on using your bonus as part of your deposit?
  • What to do if you have left it late to close your HTB ISA?
  • How to reinstate your HTB ISA after closing it?

If you are stuck and need some help then call our team of specialists on 0333 344 3234 (local call charges apply).

Fixed Fee, No Sale No Fee and Unbeatable Value Solicitors.

 

What can you spend the Help to Buy ISA Bonus on?

Here is a list of what you can spend your Help to Buy ISA Bonus on:

  • The purchase price of your property only if you are buying using a mortgage - not including the 10% deposit that the Help to Buy ISA cannot be used for

If you use it for any of the following then you can use the ISA savings, but not the ISA bonus:

  • 10% exchange deposit;
  • Solicitors' legal fees;
  • Estate agent fees;
  • any other indirect costs;
  • on a property priced over £250,000 outside of London and £450,000 inside London; or
  • the purchase price of the property if you aren't getting a mortgage.

What boroughs are listed as 'London'?
The City of London, Camden, Greenwich, Hackney, Hammersmith and Fulham, Islington, Kensington and Chelsea, Lambeth, Lewisham, Southwark, Tower Hamlets, Wandsworth, the City of Westminster, Barking and Dagenham, Barnet, Bexley, Brent, Bromley, Croydon, Ealing, Enfield, Haringey, Harrow, Havering, Hillingdon, Hounslow, Kingston upon Thames, Merton, Newham, Redbridge, Richmond upon Thames, Sutton and Waltham Forest.

Did you Know
You are only allowed to have one Help to Buy ISA per person and not all banks offer this type of ISA (check the list of approved providers here)



When does the Help to Buy ISA scheme end?

Help to Buy ISAs are available from 1 December 2015 to 30 November 2019. After this date you can still save money into your ISA however the bonus must be claimed by 1 December 2030. To open your Help to Buy ISA you must complete an Eligible Customer Declaration confirming you are eligible to use the scheme.

You are eligible if you:

  • are 16 or over;
  • have a valid National Insurance number;
  • are a UK resident;
  • have not exceeded in that year of assessment (as that term is used in the ISA Regulations) the overall subscription limit in Regulation 4ZA(1) of the ISA Regulations (the 2016 limit is £15,240); and
  • are not, and never have been, a residential property owner

How do you cash in your Help to Buy ISA?


    1
    Request your bank/building society to close down the account (this takes 7 working days to be sent to you).

Tip: If you need to get your closing statement quicker, ask your bank/building society to send it to your local branch to be collected in person.


    2
    Receive your Closing Letter and the release of the ISA and interest to you. The letter is sent by post in hard copy and it shows your total savings.

Tip: You can only benefit from the Government's contribution to your Help to Buy ISA if you have saved £1,600 or more.


    3
    Send your Closing Letter to your solicitor acting on your purchase along with your First Time Buyer Declaration.

Tip: Speed up the process by scanning, emailing and then posting your Closing Letter to your solicitor


    4
    Your solicitor requests approval for your Help to Buy bonus through Government's online portal (it can take anywhere from 2 to 5 days to be assessed)

    5
    Once the solicitor receives a Bonus Approval Notification, they will apply for a Payment Request to receive bonus.
The bonus money is paid to your solicitor, not to you and can take up to 5 working days. Your Conveyancing Solicitor will charge a fee of £50 + VAT for the handling of you Help to Buy ISA.

You may think it crazy, but you cannot use the Help to Buy ISA Bonus to fund your deposit. If your plans are to use your Help to Buy ISA to fund your deposit then you can use the savings and the interest, but not the 25% bonus



When should you close your Help to Buy ISA?

The standard time is 15 working days from you closing the account to your solicitor receiving your bonus. In the conveyancing process this will mean you'll need to look to start to close your Help to Buy ISA once you are finalising your legal enquiries. Until you close your account you can choose to keep saving money.

Is your property valued at £250,000 or more?
You will not be paid a bonus if your property is over £250,000 or £450,000 if in London.


What if you are relying on your bonus to buy your property?

If you are hoping to use your Help to Buy ISA bonus to fund your house purchase the ways to do this are:

    1
    Gift from parents
If you can afford to cover the 10% deposit from other means such as a gift from family, then the gift could be used to fund the deposit, and the Help to Buy ISA bonus can be used on completion along with your mortgage. You should inform your mortgage broker of your Help to Buy ISA bonus so they can factor this into your mortgage application.

    2
    Exchange and complete on the same day
The logistics of this may make this unachievable especially if there is a long chain. It could cost the sellers and buyers further up the chain more money whilst they scramble for last minute removers, than the bonus amount the FTB will benefit from. You can read here - How long between exchange and completion? A same day exchange and completion is often not achievable for logistical reasons and you definitely can't do it if you are buying a new build property that has yet to be completed.

    3
    Agree with the seller a 5% exchange deposit
Not all sellers will agree, however agreeing to reduce the exchange deposit down from 10% to 5% is one option which frees up the bonus to be used on completion. The buyer is still liable to pay the balance of the 5% deposit if they fail to complete after exchange. You can read - Buying with a 5% Deposit

    4
    Save longer to get the 10% and reduce your mortgage
In cases where you can't negotiate the exchange deposit down then you will need to continue saving to get a 10% deposit and then look to use the bonus on completion. If you are getting a 90% mortgage then you should look to reduce this by the sum of the bonus. The greatest challenge here is if the the seller won't wait for you to save up the additional money to fund the deposit.


Is there an Expedited service to get your bonus?

If you need to cash in your ISA in a shorter space of time, your solicitor can do this by making an urgent Bonus Request via the online portal stipulating a payment date of no less than 24 hours. In the event that a Bonus Request needs to be processed urgently and the Closing Documents are not available, the you can use an up-to-date account statement. This must detail your current balance, name, account number and product name. The statement may take the form of an online banking printout.


Can you re-instate your Help to Buy ISA?

If your property purchase fails after you have obtained your Closing Letter from your provider, your conveyancing solicitor must provide you with a Purchase Failure Notice within 10 Business Days. This letter is sent to your provider and then the Help to Buy ISA is reinstated and ready for you to carry on saving.

You can read the compete Help to Buy ISA rules here.

*Fixed Fee – No Sale No Fee – On all Major Lender Panels


Related News Articles

 
Help to Buy Home Buy Schemes
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Help to Buy ISA Scheme
18/09/2017
Purchase Completion Statement Explained
13/09/2017
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