Buying a house is a huge financial commitment. Even if you are able to get a large mortgage (a loan secured on the property), you will need savings. You will have to supply a deposit and funds to pay for the legal and mortgage fees. A Help to Buy ISA is a method that you can use to save for these expenses.
What is an ISA?
According to His Majesty’s Revenue and Customs (HMRC), an ISA (Individual Savings Account) is a method of holding tax-free savings. There are four types of ISA: cash ISAs, stocks and shares ISAs, Innovative Finance ISAs, and Lifetime ISAs. They can be opened by anyone over 18 but you must be under 40 to have a Lifetime ISA.
What is a Help to Buy ISA?
The ‘Help to Buy ISA’ was a government scheme established to help people save to buy a home. You can no longer open a Help to Buy ISA but you can continue to pay into one. A transfer of equity solicitor can advise you on how to use this money to buy a home. Services like the one detailed at https://www.parachutelaw.co.uk/transfer-of-equity-solicitor include independent legal advice on using existing funds towards the purchase of a property.
How does a Help to Buy ISA work?
You save a certain amount of money towards your first home and the Government tops up your savings by 25%, provided that there is more than £1,600 in the ISA. You can carry on making deposits into the Help to Buy ISA until November 2029 and you must claim the 25% deposit by November 2030. You should instruct your transfer of equity solicitor to apply for the bonus at the time of purchase.
Are there alternatives to Help to Buy ISAs?
If you feel that a Help to Buy ISA is not for you, there are alternatives. You could ask a transfer of equity solicitor to look into the Help to Buy Shared Ownership scheme. This gives you the opportunity to buy a share of a property and pay rent on the rest. The properties are always leasehold.
You could also consider a loan towards building a new home, called a Help to Build equity loan. Some people living in council or housing association-owned properties can participate in a Right to Buy scheme. Your solicitor can give you further advice.
