Hidden catch in the Help to Buy Isa

Residential | 24/08/16   Laura Marszalek

Recent news surrounding the catch with the Help to Buy Isa

Many of you will have heard about the government initiative of the Help to Buy Isa. The hope was that this scheme would enable first time buyers to maximise their savings tax-free, and with a 25% (maximum £3000) top-up from the Government.

However, it has recently emerged that there is a catch in the small print – this 25% bonus cannot be used to cover any part of the 10% deposit which you pay on exchange of contracts. The money will only be released on completion of the sale.

In effect what this means is that the extra bonus from the government will either reduce your mortgage borrowing by £3000, or will increase your buying power by £3000 – assuming you have the funds to cover the 10% payable on exchange, and don’t forget your expenses!

Why the catch?

Well, even after exchange of contracts, a buyer can pull out of a sale, so the money is only available when the purchase is certain to proceed.

Don’t worry, all is not lost.

Whilst it is normal practice that a 10% deposit is asked for on exchange of contracts, there is the possibility that negotiations can take place with the seller to reduce this amount.