It Would Appear That The Help To Buy ISA "Bonus" Cannot Be Used For Your Deposit.

A_Medium_Size_Jock

Reported now in a few places, it seems that the Help To Buy ISA "Bonus" cannot actually be used for your deposit on a purchase since small print states:

savers cannot get a promised "bonus" on their money until the purchase of a property is completed

according to The Telegraph.
http://www.telegraph.co.uk/news/2016/08/20/treasury-distances-itself-from-controversy-over-help-to-buy-isa/

A Treasury source insisted that Help to Buy had never been designed as a deposit saving scheme, with sources saying any of the 500,000 customers who have already signed up and are unclear should “take it up with their bank”.

I wonder how many have already subscribed and yet do not realise this? :think:
It does appear that calling this scheme "Help To Buy" is a bit of a misnomer.

Treasury link:
https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/

MobileSaver

A_Medium_Size_Jock wrote: »

it seems that the Help To Buy ISA "Bonus" cannot actually be used for your deposit on a purchase

Um, yes it can. Too many people who really should know better are getting confused between the mortgage/completion deposit and the buyer/seller/exchange deposit.

The all important mortgage deposit is set by your lender and the H2B bonus can and will be used for that, as explained in the treasury link you posted.

The initial deposit due at exchange is entirely negotiable between the buyer and seller and if a buyer is using H2B and relying on the bonus then they simply include that in their negotiations. It really isn't rocket science and is unlikely to cause anyone any problems except for the most paranoid of sellers.

A_Medium_Size_Jock

MobileSaver wrote: »

Um, yes it can. Too many people who really should know better are getting confused between the mortgage/completion deposit and the buyer/seller/exchange deposit.

The all important mortgage deposit is set by your lender and the H2B bonus can and will be used for that, as explained in the treasury link you posted.

The initial deposit due at exchange is entirely negotiable between the buyer and seller and if a buyer is using H2B and relying on the bonus then they simply include that in their negotiations. It really isn't rocket science and is unlikely to cause anyone any problems except for the most paranoid of sellers.

That is not what the article says; neither is it what the treasury say in response.
If what you are suggesting is correct it would only take a simple acknowledgement from the treasury - which is NOT what they have done.

But critics said its latest statement directly contradicted George Osborne, the former chancellor, who launched the scheme in March last year, stating: "A 10 per cent deposit on the average first home costs £15,000, so if you put in up to £12,000, we’ll put in up to £3,000 more."

But a Treasury spokesman said they had always made clear that the money could be used only towards equity in the house, not as part of the purchase.

michaels

When you purchase a house you first exchange contracts and then complete - at the exchange contracts stage you are committed to buy and pay a non-refundable deposit. As the mortgage is not released until completion the mortgage funds are not used for the conveyancing deposit.

Separately the mortgage company will agree to lend a certain proportion of the purchase price, the remainder coming from the borrower (equity). There is no necessity for the exchange deposit to be of the same size as the borrowers equity.

All that said I don't know if the borrower can use the funds in their h2b isa as part of the exchange deposit as this may result in problems with the h2b isa bonus being paid on completion?

A_Medium_Size_Jock

michaels wrote: »

All that said I don't know if the borrower can use the funds in their h2b isa as part of the exchange deposit as this may result in problems with the h2b isa bonus being paid on completion?

THAT is indeed what the (perceived?) problem is;

a flaw in the scheme means a 25 per cent government “bonus” on savings will not be paid out until the sale has completed. Experts say this renders the scheme technically useless as it is designed for those who are struggling to find the initial outlay involved in buying a home and means they will still be reliant on loans from their parents, if available.

The small print means the bonus cannot be used for this initial deposit, and can only be spent as part of the purchase cost, for example on mortgage payments, once the deal is completed.

http://www.telegraph.co.uk/news/2016/08/19/help-to-buy-isa-scandal-500000-first-time-buyers-told-scheme-can/

Thrugelmir

michaels wrote: »

All that said I don't know if the borrower can use the funds in their h2b isa as part of the exchange deposit as this may result in problems with the h2b isa bonus being paid on completion?

For many the money saved in the HTB ISA will be their (exchange) deposit. Either in part or all.

kinger101

It's a quite simple fix really. Just needs someone from the Treasury to concede the point and engage their brain rather than going on the defensive and spouting nonsense.

Thrugelmir

kinger101 wrote: »

It's a quite simple fix really. Just needs someone from the Treasury to concede the point and engage their brain rather than going on the defensive and spouting nonsense.

Probably the other way round. The media need to educate rather than spout nonsense.

kinger101

Thrugelmir wrote: »

Probably the other way round. The media need to educate rather than spout nonsense.

The media has a good point though. As many FTB will be buying with the minimum deposit, they're not likely to be in a position where they have two pots of cash. Unless buyers can be convinced to take a reduced deposit at exchange, it limits the usefulness of HTB.

Still, the more useless the scheme is, the happier I am. I don't particularly want me taxes used to help individuals buy property.

globalds

Politicians padding out the good work they have done ..
And then they wonder why people feel let down .

Thrugelmir

kinger101 wrote: »

The media has a good point though. As many FTB will be buying with the minimum deposit, they're not likely to be in a position where they have two pots of cash. Unless buyers can be convinced to take a reduced deposit at exchange, it limits the usefulness of HTB.

Still, the more useless the scheme is, the happier I am. I don't particularly want me taxes used to help individuals buy property.

If people are desperate for several hundred pounds then is house purchase for them would be my question. Another 4 years until anyone can claim the maximum bonus.

Are you happy for your taxes to fund housing benefit. I know the choice I'd make.