Using Help to Buy ISA for Deposit

markbmcfc

Hi all,

Please can someone help

Searched high and low for clarification on this and even on here, i've struggled to find a definitive answer and i'm all stressed and confused :rotfl:

So, as a background. We're looking for either 95% or 90% mortgage for this house at £214k. For arguments sake, lets say we're doing 95% and a 5% deposit of £10747.

We paid a £500 reservation fee for our new build plot. not sure if relevant but, i'm throwing it in.

Me and the other half have Help to Buy ISA's with each £3k of savings in. So we have £6k as part of our deposit. (Parents said they'd match our deposit as a gift if we save 5%, to give us 10%, but we'll ignore that for now).

So, in my simple mind, I thought, for our £10747 deposit, we could use our £6k, plus our combined 25% government bonus of £1500, and top up the difference just over £3k to give us our £10747 deposit. Is my understanding of this correct, or have I got this wrong?

This question is because of this H2B FAQ statement that says the bonus must be included at completion and cannot be used at exchange. However, i'm under the impression we have to pay our 5% deposit at exchange. (I've never bought a house before, i've no idea if what I think is right, is indeed so).

Is it a case of we pay £9247 (£10747-1500) at Exchange, so we've paid slightly less than 5%, then at Completion they use the bonus to top up our 5%?

Or is it a case of we have to take the money out of our ISA's and close them, add sufficient savings to top this up to £10747 so we have the full 5% at Exchange, and then they subtract the bonus from what we need to borrow from our lender on the mortgage? But wouldn't this effect the terms of the mortgage and we'd need to reapply as we're borrowing £1500 less?

Or am I completely wrong in every possible sense.

Oh my i'm so confused.

Please, someone either shoot me or explain this to me as if trying to talk to a chimp!

Thanks people!

Mark.

moneycantbuyyouhappiness

I too would like clarification on this.

We have to pay our 10% at exchange (likely early next week)

But as you rightly say in the FAQ it says we cannot use the HTB for exchange and it cannot be used for Solicitors fees.

Does the cash just get credited to you or what? It's so confusing.

rec0286

I'm also hopping on this as I would also like to know! (sorry to not have a useful response)

evansc1

Can't use the bonus as part of your deposit that has to be given to your solicitors ready for exchange basically.

TJParsons

So when is it used then?

evansc1

TJParsons wrote: »

So when is it used then?

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.

- See more at: https://www.helptobuy.gov.uk/help-to-buy-isa/faq/#sthash.1vSDxetz.dpuf

TJParsons

I've re-read and get the 'two types of deposit' thing, but still have a question. If on a HTB purchase, your deposit is 5%, how much is expected at exchange, and how much is expected as balance on completion?

kittyjo82

Exactly the same confusion with me. Seems pointless having a help to buy isa if you cant use the bonus to bump up your deposit. Which is the whole point as the main thing FTB fall down on is being able to get a decent deposit

MARTYM8`

Might be worth posting your query here in the ISA section - similar questions have been asked and answered there.

https://forums.moneysavingexpert.com/discussion/5371330

The help to buy isa bonus can be used at the completion stage as part of the final payment to reduce your deposit but not at exchange.

It is confusing - and in my view unnecessarily so. If mortgage lenders can sell the isa why can't your mortgage lender claim the bonus and pay it into your mortgage account - rather than relying on solicitors who may or may not be registered for the scheme (NB check yours is before you appoint them!).

kingstreet

TJParsons wrote: »

I've re-read and get the 'two types of deposit' thing, but still have a question. If on a HTB purchase, your deposit is 5%, how much is expected at exchange, and how much is expected as balance on completion?

If you are putting down 5% you will be expected to hand over 5% ahead of exchange of contracts.

MrsHluker

Hello Mark,


I am a fresh new house owner (move in this week!) and I also struggled with the HTB ISA timing of it all.


We ended up giving our full deposit to the solicitors (including the monies we had calculated would have come from the HTB bonus) before completion - we just were not sure they would have been able to "draw" money from the government for the date we set and we hoped to speed things up a little bit.


They ended up refunding us our monies (the government bonus) on the day of exchange and we got a nice letter from the chancellor of the exchequer too LOL


I think you're going to need a bit of extra £££ for various expenses when you move house anyway, so I would advise you have some wriggle room in your budget which means maybe giving them all the money up front.


Hope it helps! Best of luck with it all, it's v stressful but I believe it's worth it!