Help-to-buy ISA savers are being urged not to rush their first time dream home purchase.
Leah Morgan, trainee solicitor at Clark Brookes Turner Cary, the Midlands law firm with offices in West Bromwich and Stratford-upon-Avon, says purchasers could be caught out by the way the offer is structured.
And with the Help to Buy ISA scheme now in full swing she says those who take up the offer need to be fully conversant with the small print.
Buyers must reach £12,000 of Help to Buy ISA savings to get the maximum £3,000 Government bonus, and, with a £200 monthly contribution limit, it will likely take more than four years to reach that level. Indeed there is a minimum contribution of £1,600 before you get any bonus at all.
That is the first snag.
The second comes once you’ve found your home, confirmed your mortgage and had an offer accepted.
Ms Morgan said:
“Many people seem to think the bonus somehow magically turns up in their account, and they just go ahead and pay the money over.
But it isn’t quite like that, and it is very important you tell your conveyancer up front if you are using this type of ISA to help fund the purchase so they can be prepared. Be particularly conscious that you cannot use bonus money towards the deposit – it has to be for the actual purchase. It is possible to get around this with simultaneous exchange and completion but with a mortgage and when in a chain this is not often possible and is risky.
Also, when the relevant paperwork is in place, then it is your solicitor who will apply for the bonus on your behalf. Your bonus will go straight to the solicitor. It doesn’t sit in your account, it earns no interest, and you only get it if you buy a home. They will add these funds to your savings in order to complete the purchase.
It may take ten working days to access the bonus and all in all getting your ducks in a row might take the better part of a month.
So individual purchasers and young couples need to be patient. If you jump the gun on the removal company or pack in your rented place too early then you could find yourself in a right pickle.”