Posted on 5.7.16
It’s now been eight months since the Help to Buy ISA hit the markets and during this time we have had a number of enquiries from potential property buyers relating to how the ISAs work. Alongside general questions we’ve had some quite specific queries in relation to certain buyer circumstances when it comes to purchasing a house.
Over the past few months our Residential Property Conveyancing team have had several instructions from first time buyers who have a Help to Buy ISA and want to ‘cash this in’ as part of their deposit and receive their 25% governmental bonus. If you opened your Help to Buy account in December 2015 and deposited the maximum amount each month, including the £1,000 lump sum allowed in the first month, you’d have accumulated a saving of £2,400 – which would be boosted by a further £600 from the government if you were to purchase now.
If you’re still not sure how the basics work, this infographic should clear everything up for you.
Will my daughter still be able to claim her Help to Buy ISA boost if I lend them money to buy a property?
In this instance, the parent wished to enquire if their daughter, who was buying a house, would still be able to claim her Help to Buy ISA bonus if they lent her the money for the rest of the property – in effect a private mortgage.
The first thing to note is that to apply for the government boost, you have to meet certain eligibility criteria, which you can see here on the government website. In short:
- Must be a first time buyer purchasing a UK property to be their main residence i.e. cannot be a second home or buy-to-let property;
- Bonus will be available on purchases up to £250,000 (increased to £450,000 in London);
- Aged 16 and over.
Within the scheme rules of the Help to Buy ISA it does not state that the mortgage lender has to be a bank or building society, it just refers to a ‘legal mortgage’. Therefore if you as a parent want to set up a private mortgage between you and your offspring, the buyer’s eligibility for the Help to Buy bonus will not be impacted providing they meet the above criteria.
If you are lending a large sum of money to your son or daughter however, it is in everyone’s best interest to draw up the details, just as a bank would. Doing this will help greatly to avoid any family disputes further down the line.
It is highly advised to state how much you are lending, for how long, the interest rate and the considered repayment details – this could be a monthly set up, yearly or whatever is best to suit your needs. The best practice is to use two independent solicitors, one who will draw up the contract for the parents and then transfer the money to your offspring’s conveyancing solicitor when the funds are needed to complete the transaction. This main advantage to this is that the private mortgage will have a legal basis and the lender will be protected should the family member be unable to make repayments and borrow any more money against the property.
Let Gorvins help with your Residential Property Transaction
If you have a Help to Buy ISA and are now looking to purchase a property give us a call for a free quote. We are up-front with everything, give you a full breakdown of costs and ensure that all of our quotes have no hidden extras. Our Residential Property team are experienced when it comes to dealing with Help to Buy ISAs and have already helped several clients to buy their first homes.
If you are a parent looking to lend money then give us a call as well and we’ll be able to set out all the legalities to ensure you are protected to stop any fall outs in the future. Call today on 0343 507 5151 or send your enquiry to firstname.lastname@example.org.