Don’t panic about Help to Buy ISA rules

A residential property law expert is reminding first time buyers about how Help to Buy ISAs work after potential ‘problems’ with the accounts were revealed.

It comes after the headlines highlighted that the government bonus from a Help to Buy ISA isn’t paid until a purchase completes – resulting in concerns from buyers over funding gaps.

Michael Foxford, partner at Birchall Blackburn Law, said the firm has been advising first time buyers of this rule since the accounts were first announced, but said it highlights the need to ‘read the small print’ and there’s ‘no need to panic’.

The ISAs were launched to help first time buyers getting on the housing ladder and the government provides a 25 per cent bonus on top of the savings – up to a maximum of £3,000.

The rules state that a Help to Buy ISA bonus can’t be used in the exchange deposit – only as part of the completion funds – which was highlighted recently in the news.
Michael explained: “We reviewed the scheme terms and have been advising clients since day one that the bonus could not be used as a deposit. Although it might not be exactly what some buyers thought, there are ways around it.

“The easiest way is to use other money, which isn’t a problem in these early days as just about every buyer using Help to Buy ISA will need other funds in addition to their ISA.

“There’s no need to panic if you’re using a Help to Buy ISA it’s just a case of using funds from elsewhere for the short term – it’s unlikely to prevent somebody from buying their house. We’d just always remind buyers to make sure their conveyancer knows from the outset to avoid any issues along the way.