Help to Buy Isa scandal: Breaking News

Gazc

Thanks for the reply.

However, I still don't understand what happens with the money. What is the second part of the deposit you speak of?

:j

geneticmaterial

Yeah I don't get the 2nd part of the deposit. I will pay the 5% on exchange. 11k. 6k of that HTB (7.5k Inc bonus) and the rest from another account.

AnotherJoe

Genetic and Gazc, there are two "deposits".

The first one is the deposit you pay at exchange.
The second one is the the full deposit, minus what you paid alreday via the first "exchange deposit" .

For example, lets say you are doing a 90% mortgage on a £200k house. At exchange, traditionally, you'd be asked to put up 10% deposit but most people these days dont have that amount of cash knocking around, so they would usually negotiate a lower figure for the exchange deposit, lets say 5%, eg £10k.

So upon exchange in this example you'd need to stump up £10k, and on completion another £10k (to make it £20k in total). In effect you have to pay some of the deposit upfront as a guarantee you will go through with the deal.

So in this case instead of paying the second £10k, if your HTB ISA bonus was £2k, you'd only have to put up £8k.

Of course, if its a 95% mortgage and you pay 5% exchange deposit upfront there is no more to pay on completion, so in that case, using the above example, you'd get £2k returned to you.

The misunderstanding comes about because there are two occasions to pay a deposit and people dont understand this and since they are both called a deposit it is confusing. Might be better if the first amount was called "security" or something.

Soot2006

Exchange deposit: the amount you give the vendor via your solicitor at exchange ... often 10% but can be any negotiated amount, such as the 5% of the previous poster.

Completion deposit: the amount you give for completion to release the mortgage. So if you are getting a 85% mortgage and have paid 5% on exchange, then you would pay another 10% for completion (85 + 5 + 10 = 100% of the house purchase price to the vendor). These 10% can include the bonus.

geneticmaterial

OK. So we were giving (with HTB bonus) 11k on exchange, 5%. And taking the HTB equity loan. Our mortgage would be 75%. How does this HTB ISA affect this scenario?
Cheers):)

dhokes

With regards to new build purchases, how long/short is the gap between the exchange date and the completion date?

DRMANTISTOBOGGAN

AnotherJoe wrote: »

Genetic and Gazc, there are two "deposits".

The first one is the deposit you pay at exchange.
The second one is the the full deposit, minus what you paid alreday via the first "exchange deposit" .

For example, lets say you are doing a 90% mortgage on a £200k house. At exchange, traditionally, you'd be asked to put up 10% deposit but most people these days dont have that amount of cash knocking around, so they would usually negotiate a lower figure for the exchange deposit, lets say 5%, eg £10k.

So upon exchange in this example you'd need to stump up £10k, and on completion another £10k (to make it £20k in total). In effect you have to pay some of the deposit upfront as a guarantee you will go through with the deal.

So in this case instead of paying the second £10k, if your HTB ISA bonus was £2k, you'd only have to put up £8k.

Of course, if its a 95% mortgage and you pay 5% exchange deposit upfront there is no more to pay on completion, so in that case, using the above example, you'd get £2k returned to you.

The misunderstanding comes about because there are two occasions to pay a deposit and people dont understand this and since they are both called a deposit it is confusing. Might be better if the first amount was called "security" or something.

This was a very useful reply, thanks for this.

Does anyone know if mortgage lenders impose restrictions on the amount your exchange deposit must be? Currently going through this and in light of newly understood knowledge of the help to buy ISA I'd like to say to the developer we're buying from rather than the full 5% at exchange we'll give you 4.2% at exchange and 0.8% on completion when we receive the bonus.
I'm not anticipating the developer having any problem with this as they've thrown very thing and the kitchen sink at us in order to get us into this house - just concerned Halifax will have something to say about it?

AnotherJoe

geneticmaterial wrote: »

OK. So we were giving (with HTB bonus) 11k on exchange, 5%. And taking the HTB equity loan. Our mortgage would be 75%. How does this HTB ISA affect this scenario?
Cheers):)

So you will be paying 5% exchange deposit, and then later at completion the remaining 20% deposit which together with the 75% mortgage, is 100% (plus the stamp duty and solicitors costs etc).
Lets say your HTB bonus is the maximum, £3k.
So the £3k you planned to use as part of the £11k exchange deposit wont be available until completion, so you'll have to find that from elsewhere, which it seems you have as you have the 20% deposit*, and you'll "get it back" at completion.

* If that 20% deposit is from equity in another house which will be released by its sale then you do need to find it as cash.

pinkfluffybabe

dhokes wrote: »

With regards to new build purchases, how long/short is the gap between the exchange date and the completion date?

It will depend on how far along your house is when you agree to buy it. You are supposed to exchange contracts within 28 days of reservation, and completion is when the house is ready. For us, exchange will likely be September and completion will be December. If you reserve off plan, it might be longer, if you buy almost ready, it will be shorter.

DRMANTISTOBOGGAN wrote: »

This was a very useful reply, thanks for this.

Does anyone know if mortgage lenders impose restrictions on the amount your exchange deposit must be? Currently going through this and in light of newly understood knowledge of the help to buy ISA I'd like to say to the developer we're buying from rather than the full 5% at exchange we'll give you 4.2% at exchange and 0.8% on completion when we receive the bonus.
I'm not anticipating the developer having any problem with this as they've thrown very thing and the kitchen sink at us in order to get us into this house - just concerned Halifax will have something to say about it?

Our developer asks for £2000 deposit at exchange, with the rest to come on completion, so worth checking your paperwork for that. As far as I'm aware, my mortgage lender won't be interfering in that. The rest of our deposit will be paid on completion. Your lawyer should be able to advise you on timescales for asking the bank to give you a HTB closing letter so that they can process the bonus on time.

AnotherJoe

DRMANTISTOBOGGAN wrote: »

Does anyone know if mortgage lenders impose restrictions on the amount your exchange deposit must be? Currently going through this and in light of newly understood knowledge of the help to buy ISA I'd like to say to the developer we're buying from rather than the full 5% at exchange we'll give you 4.2% at exchange and 0.8% on completion when we receive the bonus.
I'm not anticipating the developer having any problem with this as they've thrown very thing and the kitchen sink at us in order to get us into this house - just concerned Halifax will have something to say about it?

Its not up to the mortgage lender at all, they arent even involved in that, its up to the seller so talk to the developer.