Help to Buy ISA terms

Corelli

Greetings,

I am helping my daughter manage an inheritance. A help to buy ISA fed by a Santander 123 account seems like a good idea for here, she would be a first time buyer when she does buy.

However, I've been looking at the details and seen that any property bought under this scheme must not be let out. Now, she is young and single but kind of starting to get involved with someone who has a home provided as part of their employment.

Lots of 'ifs' and crystal ball gazing here, but what would happen if at some time she did move in with a partner and wanted to let out her own home?

Has anyone investigated further and found out how this would be handled? Might it be a matter of paying back the government contribution that was given on top of the ISA?

littlegreenfrog_2

I asked Nationwide about this when I opened my Help to Buy ISA. I am looking to buy my first property and would initially live in it, but I may go and work abroad at some point. The person I spoke to said that as long as I was purchasing the property as a home to live in, it would be ok. I don't think it's like some of the other help to buy schemes where you are restricted from selling or letting out your home for a certain period of time. I think the only rule is that you're not allowed to use a Help to Buy ISA to fund a buy to let. I don't think this is likely to be scrutinised too closely, since the Help to Buy ISA is only available to first time buyers and it would be very difficult for a first time buyer to be approved for a buy to let mortgage.

amnblog

The H2B ISA is designed in such a way that the bonus is only payable via the solicitor for use in a H2B purchase.

The terms of a H2B purchase are quite clear.

'Q Can I sublet my Help to Buy home?

No. Help to Buy is designed to assist you to move on to or up the housing ladder. If you wish to sublet, you will first have to repay the Help to Buy equity loan assistance.

In exceptional circumstances (e.g. a serving member of the Armed Forces staff whose tour of duty requires them to serve away from the area in which they live for a fixed period, then sub-letting is allowed. In these circumstances you would also require approval from your mortgage lender and Post sales agent). '

The Government is already penalising buy to let landlords via new legislation so do not expect this to change.

Mithos

amnblog wrote: »

The H2B ISA is designed in such a way that the bonus is only payable via the solicitor for use in a H2B purchase.

The terms of a H2B purchase are quite clear.

'Q Can I sublet my Help to Buy home?

No. Help to Buy is designed to assist you to move on to or up the housing ladder. If you wish to sublet, you will first have to repay the Help to Buy equity loan assistance.

In exceptional circumstances (e.g. a serving member of the Armed Forces staff whose tour of duty requires them to serve away from the area in which they live for a fixed period, then sub-letting is allowed. In these circumstances you would also require approval from your mortgage lender and Post sales agent). '

The Government is already penalising buy to let landlords via new legislation so do not expect this to change.

I'm not sure this is correct. A Help to Buy ISA is not a "loan" or a "grant", the Government define it as a "Bonus". Naturally it will only pay out if the property purchase is on a residential basis, but the Government surely won't police the future use of the property indefinitely, especially as peoples circumstances can be changeable?

If my thinking is correct then those meeting the criteria can buy their own home, and if they later chose to let it out then they can. No need to pay back the "bonus". Obviously mortgage lenders can take a dim view on letting out what was a residential mortgage originally so there may be consent to gain or fees to pay if this option "to let" is explored later on.

amnblog

It is correct only in that is it taken direct from the Government's Help to Guy Guide.

Failure to 'Police it' does not change the rules.

Corelli

Thanks. She, and anyone else in this hypothetical future situation, will need to be prepared to pay back the bonus. So long as there are no further penalties that sounds fair.

Thrugelmir

Corelli wrote: »

So long as there are no further penalties that sounds fair.

If the intention is to abuse the scheme in some way then one should expect a penalty of some kind. Otherwise there would no deterrent. After all it's tax payers in general that are funding the scheme. That's where fairness comes into play.

Corelli

Absolutely no intention to abuse the scheme, more a wondering what would happen if circumstances change in the future.

Thrugelmir

Corelli wrote: »

Absolutely no intention to abuse the scheme, more a wondering what would happen if circumstances change in the future.

Nothing. Though the contractual terms would change in any event. So an interest loading would be a likely outcome. Nor is BTL potentially as rewarding with the forthcoming tax rule changes.

Though the "bonus" is relatively small in the scheme of things. For most people will only cover the purchase costs of the property at best.

Picking up on something you said earlier.

but kind of starting to get involved with someone who has a home provided as part of their employment.

This is a potential change where eventually the HTB ISA would be of benefit to your daughter. Bonus can be claimed until 2030.