Help to Buy ISA guide

eskbanker

jackmack26 wrote: »

My wife and I are buying our first home under the help to buy equity loan scheme. We will be exchanging contract next month.

Two questions about HELP TO BUY: ISA

When should we be paying the 5% deposit? On exchange or completion?

Will our help to buy: ISA savings and bonus be a part of that deposit?

Many thanks

See https://www.helptobuy.gov.uk/help-to-buy-isa/faq/, where it's clarified that HTB ISA money (including bonus) is only for use towards the (remaining) cost of the property at completion not exchange:

Can I use the Help to Buy: ISA government bonus for the deposit when I exchange contracts for my house purchase?

The Help to Buy: ISA bonus must be claimed on your behalf by a solicitor or conveyancer in anticipation of the completion date. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.

Sophiehorsley508

I get the above but I have also seen two or 3 people on here who have paid their solicitor their deposit money on exchange minus their bonus.

Ie they were due to pay £10000 and their bonus is £400 so they have paid their solicitors £9600 and this is how it's worked.

If you paid the full £10000 and used the bonus toward the mortgage it would throw out all the calculations given in the mortgage offer etc...

They really do need to make everything clearer. I'm sure they will in time , it's just annoying for us guys now trying to understand what we are paying and when the bonus is getting used. :eek::eek:

jackmack26

I am buying with the equity loan of 40%, so I only have a 5% deposit (the flat is £310,000, so my deposit is of course £15,500 and the equity loan is £124,000). I thought the Help to Buy ISA funds could be used towards the 5% deposit (which I assume is the deposit payable on exchange of contracts). It seems now the ISA funds can only be used at completion. My mortgage offer will be for 55% of the purchase price (i.e. £170,500). So if my ISA funds get paid to my lender on completion then do those funds serve to immediately reduce the amount I've borrowed from the bank? Clearly my 5% deposit, 40% equity loan and 55% mortgage make up the full purchase price, so I don't understand what is meant by a 'mortgage deposit', as there is no shortfall I need to make up?

Many thanks

eskbanker

It all comes down to ambiguity over the word 'deposit', which is confusingly used to represent two completely different things.

One is the advance payment made to secure a property at exchange of contracts.

The other is the amount of funding being made by the purchaser that isn't being provided by a mortgage lender, i.e. the gap between property value and loan(s). The MSE guide chooses to use the term 'mortgage deposit' for this.

The HTB ISA money (including bonus) can only be used for the latter (at completion) but definitely not the former, as per the FAQ extract I posted a few posts back.

If you're paying your entire equity contribution at exchange, i.e. the only funding left to make up the full property value is mortgage/loan, then yes, the HTB ISA effectively then reduces the value of the mortgage or loan that you need to take out.

masonic

eskbanker wrote: »

If you're paying your entire equity contribution at exchange, i.e. the only funding left to make up the full property value is mortgage/loan, then yes, the HTB ISA effectively then reduces the value of the mortgage or loan that you need to take out.

Or, to put it another way, it is there to help you raise the capital your mortgage lender requires you to put towards the purchase.

jackmack26

Then why does my help to buy ISA provider explains that help to buy ISA bonus can be used as the DEPOSIT? In my case, I don't think I will need to raise any capital at all at any stage of the transaction then how will I be able to use help to buy ISA bonus?

eskbanker

jackmack26 wrote: »

Then why does my help to buy ISA provider explains that help to buy ISA bonus can be used as the DEPOSIT?

Poor choice of wording perhaps - as above the same word can be used for multiple things so either you're choosing to interpret it one way when they mean another or they've erred in their documentation. Which provider and do you have a link to where they say this?

jackmack26 wrote: »

In my case, I don't think I will need to raise any capital at all at any stage of the transaction then how will I be able to use help to buy ISA bonus?

It sounds like you don't really need any help to buy then!

Why don't you just reduce the amount of the mortgage (or equity loan) you're taking out?

goodwife1967

All I can find in the guide is "HTB ISA can be used to buy ANY residential home", does anyone know if that includes residential houseboats? After all it would be my primary residence and I would have to pay Council Tax.

eskbanker

goodwife1967 wrote: »

All I can find in the guide is "HTB ISA can be used to buy ANY residential home", does anyone know if that includes residential houseboats? After all it would be my primary residence and I would have to pay Council Tax.

No, sorry to hole your argument below the waterline, but the official scheme rules make it clear that the HTB monies must be used towards the purchase of an Eligible Interest in Land, the definition of which ultimately includes the stipulation that it "comprises a building".

kim-newcombe

On FAQ it was said that a parent can give money to their son or daughter and as long as they open the Help to Buy ISA account its fine... But can the money from parents bank go straight into their ISA account?

Also if it was your partner, they open their account, can yourself put the money into it?