What is the Help to Buy ISA?

With property costs increasing faster than real wages, more first-time buyers than ever are seeking the help of financial advisors.

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One recently introduced product to help first-time buyers is the Help to Buy ISA, but it has been heavily criticised due to its confusing terms, and a lack of transparency, so how can you best cut through the confusion and help your clients make use of this savings product?

Who can use it, and what do they get?

Introduced in December 2015, the Help to Buy ISA provides up to £3,000 toward a buyer’s first property purchase. The idea is deceptively simple. Your client will open a Help to Buy ISA from any participating bank or building society, put money into it, and when it comes to completing the purchase of their property, they receive a bonus from the government of 25% of the amount they have saved, up to a maximum of £3,000.

To qualify, the purchaser needs to be over 16, have a National Insurance number, be a UK resident, and be a first time buyer who does not own property anywhere else in the world.

Where do financial advisers come in?

The criticisms of the scheme surround the additional requirements. First, the home must be purchased on a mortgage. While not a major barrier, this in itself usually means the purchaser will benefit from professional advice. Other restrictions are based on the value of the intended property, which changes based on location in the UK, as well as whether or not the purchaser has a current cash ISA. If they do, they can still obtain a Help to Buy ISA, but there are additional steps they must go through.

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For most professionals, identifying qualifying clients will be extremely straightforward. However, as with any FCA regulated activities, there is a certain regulatory burden to be overcome, but by using back office systems for financial advisers, such as https://www.intelliflo.com/, advisers can help ensure that all the required boxes are ticked, in order for the ISA application to be accepted.

Basically, the Help to Buy ISA scheme is free money from the government for your clients, so long as you are able to quickly identify their eligibility, and navigate them through the hurdles inherent in any FCA regulated activity.