Savings options for first-time buyers can be a bit confusing, so in this week’s Q&A Darren Polson offers an insight into what’s on offer as he helps a reader with a Help to Buy ISA query
The Question
I’ve been saving in a Help to Buy ISA for several years now, but I’ve discovered that I can only use it buy a property which is £250,000 or less. I’m buying the South East of England and it’s proving quite challenging to find a family home for less than this price here.
As such I wondered if I could transfer the money to another savings account, such as a Lifetime ISA? If not, then what will happen to the money I’ve saved if I cannot use it?
Thanks for your advice.
Darren’s Answer
I completely understand the challenges you are facing, particularly given your geographical location and average house prices. The Help to Buy (HTB) ISA can be a great tool for first-time buyers saving to buy a house up to the value of £250,000 outside London or £450,000 inside London.
As the deadline to open a HTB ISA has passed, you can keep saving until 30 November 2029. You’ll then have until 1 December 2030 to claim the 25% bonus (i.e. buy your first home).
When you are successful in your house purchase, this is when you can claim the bonus funds.
The money has to go towards the completion of your property, so you can’t use it to pay your legal or estate agent fees, or any other costs.
When you have an offer accepted on a property, it is important that you do not withdraw your money. You can obtain what is known as a ‘closing letter’ from your HTB ISA provider and give this to your solicitor or conveyancer so that they can apply for the government bonus.
In terms of whether to transfer your HTB ISA or not, the Lifetime ISA also has a 25% bonus if you use the savings towards your first home.
The real positive for you is that the Lifetime ISA can be for any property amount and not restricted to the £250,000 limit.
Bear in mind that you will incur a penalty if you withdraw in the first year of the Lifetime ISA, so be sure to hold off on that dream property or you will have a fee to pay
I would recommend speaking advise to a broker, who can guide you through the house-buying journey.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
