Help to Buy Isa scandal: Breaking News

Gunther_Golf

Folks

Having read through the thread i'm still pretty confused by this. Could someone with a good grasp of the situation explain using this really straightforward example (i'm aware not enough time has passed for couple X to have saved £4k each just using the figure to keep things straightforward).

Couple X are both FTB's therefore have a HTB ISA each. They have saved £4000 in each account and are/were looking forward to the government bonus of £1000 per account.

House Purchase Price: £100,000
Deposit: 10% (£10,000)
Mortgage: £90,000

Couple X's combined ISA funds are £8000 and were under the impression the government £2000 bonus (for both accounts) would make up the shortfall for their 10% deposit.

Do Couple X now need to find the £2k shortfall from elsewhere? Does the £2k "bonus" simply reduce the mortgage from £90k to £88k or how else does Couple X get the £2k bonus and in what form?

Thanks

Rosemary7391

Gunther_Golf wrote: »

Folks

Having read through the thread i'm still pretty confused by this. Could someone with a good grasp of the situation explain using this really straightforward example (i'm aware not enough time has passed for couple X to have saved £4k each just using the figure to keep things straightforward).

Couple X are both FTB's therefore have a HTB ISA each. They have saved £4000 in each account and are/were looking forward to the government bonus of £1000 per account.

House Purchase Price: £100,000
Deposit: 10% (£10,000)
Mortgage: £90,000

Couple X's combined ISA funds are £8000 and were under the impression the government £2000 bonus (for both accounts) would make up the shortfall for their 10% deposit.

Do Couple X now need to find the £2k shortfall from elsewhere? Does the £2k "bonus" simply reduce the mortgage from £90k to £88k or how else does Couple X get the £2k bonus and in what form?

Thanks

They pay the £8000 to their solicitor on exchange of contracts, having agreed an 8% exchange deposit with the seller. Then the solicitor gets the bonus for them, and on completion will pay the seller £8k from them, £2k bonus and £90k from the mortgage company. So they don't need to find the extra £2k. Hope that helps

Gunther_Golf

Thank you Rosemary

So basically the deposit is "manipulated" at the point of exchange deposit with the "shortfall" made up at the point of full exchange. Couple X are still then okay to seek a 90% LTV mortgage?

MobileSaver

DRMANTISTOBOGGAN wrote: »

Does anyone know if mortgage lenders impose restrictions on the amount your exchange deposit must be?

No, the exchange deposit has nothing to do with your lender; the exchange deposit is an amount agreed between you and the seller.

Your lender is only concerned with the mortgage deposit which is paid at completion. The mortgage deposit will be made up of any extra funds you provide, any H2B bonus you receive and your initial exchange deposit and these three together must equal the agreed 5%, 10%, 15% or whatever that your lender has stipulated for completion to take place.

AnotherJoe

Gunther, you need to separate out in your understanding, the initial or exchange deposit, and the 10% (in your example) deposit you pay on completion that together with the 90% mortgage makes up the 100% paid.

The initial/exchange deposit is there just to keep you "honest" and ensure you don't do a runner between exchange and completion. It's nothing to do with your lender. If you were buying from a trusting relative for example, they might be happy to accept a fiver as this exchange deposit. Whatever you do pay at exchnage, gets counted in at completion when its all "trued up".

The default position is for the seller to ask for 10% for exchange deposit. Reminder, that's the "keeping you honest" deposit. Nothing to do with your lender.

If 10% is too much of a stretch for you negotiate a lower amount, such as the 8% that Rosemary suggests in her example (it was 5% on my last purchase). if they insist on 10% and you haven't got it without the bonus, then you need to borrow it for the few weeks between exchange and completion when it all balances out.

whizzybee

The whole thing has confused me but I don't think it is a scam, just a misunderstanding of what money is required when. So I am buying a house for 85k at the moment, I have a mortgage for 78500, so I need to put down a 6.5k deposit. Now I am using a HTB ISA so at exchange I can only put down c.5.8k and at completion the bonus will then make up the shortfall

After initially panicking, I spoke to the solicitor as the 10% at exchange is standard so obviously I had to point out that mine would be less as I have a <10% deposit. Basically they said it is fine to exchange at less than that amount but I would be liable for the shortfall should I pull out of the purchase between exchange and completion.

Thats what I am hoping anyway :eek:

AnotherJoe

whizzybee wrote: »

The whole thing has confused me but I don't think it is a scam, just a misunderstanding of what money is required when. So I am buying a house for 85k at the moment, I have a mortgage for 78500, so I need to put down a 6.5k deposit. Now I am using a HTB ISA so at exchange I can only put down c.5.8k and at completion the bonus will then make up the shortfall

After initially panicking, I spoke to the solicitor as the 10% at exchange is standard so obviously I had to point out that mine would be less as I have a <10% deposit. Basically they said it is fine to exchange at less than that amount but I would be liable for the shortfall should I pull out of the purchase between exchange and completion.

Thats what I am hoping anyway :eek:

that's fine as long as the seller agrees They don't have to. It might be your solicitor asked the sellers solicitor if that was OK.

Gunther_Golf

Thanks for that AJ

First time buyer so still learning the ropes

Crashy_Time

Basically Gunther property is a Ponzi scheme that overheated, but the PTB don`t want it to collapse all in one go, yet, so they need little wheezes to kid people on that the problem lies in the ability to pay, not the loose credit inflated price. Sadly some people still seem to buy this line, but the good news is that not even being able to swing a Remain vote the PTB probably don`t have the same power they once did to influence our major decisions about money/debt/politics. All good IMO.

Crashy_Time

http://www.bristolpost.co.uk/first-time-buyers-take-note-help-to-buy-scheme-closes-at-the-end-of-2016/story-29629108-detail/story.html