Help to Buy ISA guide

kaycastle wrote: »

I have a question about help to buy ISAs.

I've already got a house but can you use help to buy ISA products anyway. I know I won't get 25% bonus obviously, but I couldn't help but notice that all the interest rates seem to be better on those then some of the standard ISAs. Is that allowed?

No, if you already have a property (or have ever owned one) you will not be able to truthfully sign the 'eligible customer declaration' on account opening which states that you don't own and have never owned any interest in residential property.

You are right, the rates are higher than for most other cash ISA types. This is because:

- the accounts are small in size - customer is only going to be putting in a maximum £200 of new money a month, so not much for the bank to pay interest on (less than 'normal' ISA products);
- may sometimes result in a mortgage sale too ;
- it's a competitive market with limited number of eligible customers who want the product;

- so banks or building societies that offer it, are happy to pay high rates

If you want to save £200pm but are frustrated that most cash ISAs pay low interest rates, you should check out the various 'regular saver' non-ISA accounts offered by various high street names. For example, Nationwide have one at 5% on up to £250pm. Even after tax (if you even earn enough to exceed your personal savings allowance) the net rate is competitive.

masonic wrote: »

There is nothing in the legislation or scheme rules stating that the balance of the ISA must be used towards the purchase. You'd need to get your solicitor on board with this though.

Yes, the rule is that the bonus can only be obtained and collected by the conveyancer/ solicitor into their client money account, on condition of applying the bonus (and any interest that the conveyancer gives on the bonus amount for the period while it's sitting in their client money account) towards the purchase price - so the bonus will reduce the size of the mortgage you need or the amount of money (if any) you intend to put towards the purchase price after the initial 5% exchange deposit.

It's a multi stage process:
- you close the HTB ISA with at least £1600 in it and obtain the closing documentation;
- you give the closing documents to the conveyancer and make the relevant declarations;
- the conveyancer claims the bonus cash into their client money account;
- the conveyancer pays the bonus cash over to the seller at the same time as he pays the rest of the completion monies (including the mortgage amount he got from your lender etc)

None of those stages involve you giving the conveyancer the £1600, if you don't want to. Any money you do give them (e.g. for further cash towards the purchase price or for their fees and other things) can come from whatever bank account you like, and doesn't specifically need to come from the £1600 you got when you closed the ISA.

When Masonic says you might need to get your solicitor on board with this, he means that solicitors when you tell them you have a HTB account and need them to process a bonus claim for you, might assume that the £1600 and the bonus amount will be available towards the property; and if you don't want to spend the £1600 on the property you should tell them up front and have them confirm they understand your plans - which would also give them a chance to tell them it's not allowed, if there is some rule against it that we aren't aware of.

If you were doing your savings as a Lifetime ISA, they would have to confirm that the whole amount withdrawn from the account would be used on the property purchase to avoid penalties. But a HtB ISA does not involve confirming the whole amount withdrawn will be applied to the purchase - the claim form only relates to the bonus itself. The account closure paperwork for the £1600 is only there to help them prove what amount of bonus is eligible to be claimed.