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help to buy isa

Are You Looking for a Help to Buy ISA?

People dream of buying a home, even though it requires saving a lot of money and also proper planning. There are many ways you can go ahead with your plans regarding this matter. As for the financial aspect, you can even get help from the government. As you know, you have to pay tax on the interest you receive in a savings account. 

The government does allow you to earn up to a certain amount without having to pay tax. However, it’s not even close to being sufficient to get you a new house. For that purpose, you can save your money in a Help to Buy savings account run by the government. 

Since this option is closed since 30th November 2019, you can’t avail it, if you haven’t already. If you don’t have a Help to Buy, there are still other options you can choose from. So, keep reading to get a better understanding of this matter.

How do they help you with Purchasing a Property?

If you already have an account, it can take you a long way forward in getting your dream home. You can save an amount of up to £12,000 in this account. Not only that, but the government will also add bonuses to the amount you save. So, this is a scheme that is meant for helping you out with buying a home. 

If you want to get the bonuses, you’ll have to save a certain amount in the account. After that, you’ll automatically receive them from the government.

What amount of Bonus do you get paid?

You have to save at least £1,600 if you want a bonus from the government. You’ll get 25% of the amount you’ve saved up to £12,000. If your savings are more than that, the government will add £3,000 to the sum. This would be very helpful to you in getting closer to buying a home.

Who can use Help to Buy ISA?

There are some criteria before you can start an account. First, you can’t avail it unless you’re more than 16 years of age. In addition to that, you can use it only if you are buying a home for the first time. 

In case that’s not so, you have to look for other such schemes or maybe a loan. Another very important condition is that the home being bought should be located in the UK. Moreover, it should not have a cost of more than £450,000, in case it’s situated in London. If it’s located in any other part of the country, then it should have a value below £250,000.

You can’t rent the house after you buy it with the help of this scheme. The purchase should be purely for your residence and made through a mortgage agreement.

What to do if you want to earn interest in your ISA?

In case you’re wondering, you can’t earn any interest on your savings in a Help to Buy ISA. On top of that, you get bonuses only after you have saved a specified amount. So, the money you have in the account doesn’t increase, if you have saved any less than what’s required for a bonus. 

This can understandably be a disadvantage to you. Luckily, you can simply transfer it to a private bank. By doing that, you can avail all the services of your new provider. Moreover, you can transfer your ISA as many times as you want, and there are no limits. You just have to be careful and tell the new organization, who’ll provide you with the ISA, to deal with the transfer.

How much time do you have for saving while using a Help to Buy ISA?

As you know, this particular scheme has been closed for new applicants. It is also going to be closed to the existing account holders as well in the not-too-distant future. If you have an account with this scheme, you have until 30 November 2029 before it closes for you as well. So, you can keep saving money in this account until that time, and then transfer it to a bank that offers you the best interest rate on it.

How would a lifetime ISA help you in saving for a Mortgage?

A Help to Buy ISA, as you know, is no longer available for those who already don’t have one. In case, you’re one of those for whom it is too late to avail it, you might ask if there’s an alternative. There is one, and it’s called a lifetime ISA. You can say that it works in the same way as the help-to-buy, but with some changes.

A lifetime ISA permits you to deposit a maximum of £4,000 annually into the account. The government will give you a monthly bonus of 25% on your savings. However, there’s a limit to the amount you’ll receive every year, which is £1,000 or below. You can save up to £20,000 tax-free. You can’t withdraw this money at just any time other than buying a home without paying a tax for it. You either have to be terminally ill or reached the age of 60 to be able to do that.

Can you avail of a Lifetime ISA?

When it comes to the age restrictions, any residents of the UK who are not below 18 or above 40 years of age can start a lifetime ISA. If you don’t reside in the UK, you must be serving the Crown to avail this ISA. 

In addition to that, the reason for the purchase of the home should be only to live in it. The cost of the property shouldn’t exceed £450,000. Also, you must buy only by means of a mortgage.

Is it possible to change your temporary ISA to a lifetime one?

In case you’re wondering whether you can just change to a lifetime ISA, that is actually possible. However, you might want to consider carefully before making a decision. The bonuses that you get in a lifetime ISA is less than that in the previous arrangement. You will stop getting all the perks of the previous arrangement as soon as you change to the new one. After that, you’ll only get the bonus according to the new rules.

Can Debtors take money from your ISA?

The ISA you have made is subject to different kinds of help from the government and some of it is protected from tax. However, that is not necessarily the case when it comes to creditors. If you owe someone an unsecured debt and keep ignoring their payment requests, they can recover the money from your savings. They will do this by getting an order from the court. Since they can do that only as a last resort, you need not worry too much. If you make some kind of payment arrangement, there’s no chance of you losing the money you have saved for buying a home.

What should you do if you fail to buy a home?

People can possibly fail to make the purchase that they saved money for. Just in case you find yourself in that situation, you must know that your account will be closed. In case you’re wondering what would happen to the money, you won’t lose it. 

You would just have to pay some tax on it. Additionally, you would still have the option of having the account reopened. Just be sure to do so within 12 months after the closure. Then, you can start saving money for your dream house once again.

What happens if you cancel your plans to buy a home?

Suppose you give up your plans to buy a residential property for which you have been saving until now. This could be due to various reasons, such as the need for money to pay for some other expenses. In such a case, you have to return any bonus if you have claimed any. As for the money that you have saved and the interest you got on it, they would remain with you. This situation would be treated the same way as failure to purchase a home. In other words, your ISA would be closed.

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