With the deadline of 30th November for applications for help-to-buy ISAs fast approaching, our team at consumeradvice.scot have demystified and simplified the process of applying for a help-to-buy ISA before it’s too late. A substantial free bonus is paid by the government, leaving many to wonder why first-time buyers wouldn’t want to apply for the scheme in the first place.
The Government are helping first-time buyers to get on the property ladder by supplementing their savings by 25%. Those taking advantage of the scheme are required to save at least £1,600 in order to claim the minimum government bonus of £400. The maximum that can be awarded by the government is capped at £3,000 (which would entail the account holder saving £12,000). However, there are no limits to the amount of money you can save in your ISA.
This scheme has proved revolutionary in encouraging potential homeowners to save, offering individuals the opportunity to substantially increase the amount which can be contributed to a deposit when purchasing their first property. Yet, on a national scale, uptake of the scheme has been surprisingly low.
Recent figures indicate that individuals opening Help-To-Buy ISAs have varied across the UK, with one source indicating that Scotland has the largest uptake at almost 11% of people who qualify. This relatively low figure is surprising, considering the assistance the scheme provides in initially getting onto the property ladder and the value of government bonus available.
Unaware of help-to-buy
Conlon from Glasgow had discussed the help-to-buy ISA with his girlfriend several times, but wasn’t fully aware of the potential that the scheme had –
“We had spoken about the help-to-buy ISAs before in general conversation, but I hadn’t really looked into it. The ability to save and have a 25% bonus contributed by the government at the end really opens your eyes to the possibilities of getting onto the property ladder, especially with the increasing costs of buying half-decent property in Glasgow.”
Unaware of the application process
For many others, it is finding time to apply for the scheme, with many assuming the process will be an arduous one. Yet, in reality, the process is straight-forward. Conlon told us about his friend and how she had similar misconceptions.
“My friend was the same as me – always saying how she would get around to it eventually, and when I went ahead and just did it (the application) through my banking app, it couldn’t have been easier. I don’t know why I wasted so much time thinking about it. My friend is going to apply later today.”
The entire process, including the application, couldn’t be easier. Consumers simply select the bank or building society that they want to apply through and start saving!
How does the process work?
- Open a help-to-buy ISA with a recognised provider & deposit up to £1,200.
- Save up to £200 per month (Until there is a minimum of £1,600 saved).
- Receive the bonus – A solicitor will apply for the government bonus for savers once they tell their bank or building society that they are closing the help-to-buy ISA.
Individual Eligibility Criteria
There is certain criteria which must be met in order to be eligible for a help-to-buy ISA. The applicant should be:
- Aged 16 years or older
- Have a valid NI number
- Be a resident of the UK
- Be a first-time buyer and not own a property anywhere in the world
- Not have another active cash ISA in the same Tax year (You can still open a help-to-buy but will be required to take additional steps, such as transferring up to £1,200 into the new ISA – see government website for guidelines).
Property Eligibility Criteria
There are also several property-related eligibility factors that must be taken into consideration by potential beneficiaries of help-to-buy:
- The property must be in the UK
- Value up to £250,000 (or £450,000 in London)
- Be the only home they will own
- Be where they intend on living
- Be purchased with a mortgage
Help-to-buy ISA can also be used in conjunction with certain other government schemes, such as ‘Help to Buy: Equity Loan Scheme’ and ‘Shared Equity’.
Help-to-buy ISAs are for individuals only, however, the benefit here is the ability for couples or those first-time-buyers who are going to do so together, to save separately and then receive separate bonuses that can then be used as a contributory figure to purchase together (ensuring they are operating within property valuation limits).
Different banks and building societies have different rules in relation to withdrawing funds from the scheme, with many allowing the movement of cash in line with their own changing requirements. Each financial establishment has its own protocol on how the money is managed and these questions should be asked prior to application.
Deadlines
Applying for the Help-To-Buy ISA – 30th November 2019 (Try not to leave it to the last minute!)
PLEASE NOTE: Certain banks and building societies may have earlier deadlines e.g. Santander – 28th November
Claiming your bonus from the Government – 30th November 2030 (Ensuring you have applied and paid into your ISA with £1,200 minimum savings).
More information
For access to more information and the Government guide on help-to-buy ISAs, click HERE
We have put together our top tips to consider when shopping around for the best help-to-buy ISAs on the market. Remember that the deadline for applications is the 30th November 2019 and that banks and building societies may already be fully booked for applications face-to-face, and as such, it may be easier to apply through online banking or banking applications.
- Don’t lose heart when there are no appointments – Many banks facilitate the application for a help-to-buy ISA online through banking apps, allowing you to open one from as little as £1.
- Shop around for the best deals – Look at examples. This will give you an idea of the amount you need to save and the total value which the government will contribute (Remember the government cap is £3,000).
- Read the small print – Ensure that you read the small print. Some financial institutions are very specific about what the money will be used for. Ensure that you are getting the correct product for your requirements.
- Ask questions! – Remember that if there is anything at all you are unsure of with help-to-buy ISAs, you can discuss this with the bank or building society. Many institutions have websites with Frequently Asked Questions (FAQs).
- If withdrawing funds, remember deposit limits – You can withdraw any amount (up to the balance of your deposited amount), however, you are still bound by the £200 monthly limit for deposit. Be careful when withdrawing and remember that it’s not as easy to put it back in as it is to withdraw!
If you would like more advice or information on any consumer matter, you can contact consumeradvice.scot on 0808 164 6000. We are open 9am-5pm, Monday-Friday. You can follow us on social media – Twitter: @advicedotscot and Facebook at www.facebook.com/advice.scot, Instagram: @advice.scot, or get ahead by visiting our knowledge centre at www.consumeradvice.scot.