Help to buy ISA - Deposit issues

Mogley

I'm not an expert and posted the link as I remembered reading it recently. I understand it as this.
There is no second deposit.


The Mortgage provider requires 10% deposit. You can apply for a mortgage to include the governments contribution. You would only need £8k in your HTB ISA to achieve 10% mortgage deposit on £100k.
The seller would like 10% to exchange contracts. This is the money you have personally saved. You would need £10k to exchange contracts on £100k house. You cannot count the government contribution in the amount to exchange contracts. So your £8k in the HTB ISA would need to be topped up with savings from elsewhere to achieve your £10k "home exchange deposit". On completion, your solicitor will apply to get the 20% (£2k) contribution to the final sale to complete the 10% required for your mortgage.


I hope this makes sense.

kingstreet

Fair enough. I guess i join a large community of first time buyers frustrated by this.

Plenty of discussion on this subject on HBR&S.

As it's not directly related to mortgages it's mostly appeared over there.

chamelious

"The Mortgage provider requires 10% deposit. You can apply for a mortgage to include the governments contribution. You would only need £8k in your HTB ISA to achieve 10% mortgage deposit on £100k.
The seller would like 10% to exchange contracts. This is the money you have personally saved. You would need £10k to exchange contracts on £100k house. You cannot count the government contribution in the amount to exchange contracts. So your £8k in the HTB ISA would need to be topped up with savings from elsewhere to achieve your £10k "home exchange deposit". On completion, your solicitor will apply to get the 20% (£2k) contribution to the final sale to complete the 10% required for your mortgage."

But, you've already paid your 10%, with the 8k and 2k you've pulled from elsewhere? When you get to completion, where has the extra 2k gone? Surely the 2k extra makes your deposit 12k in total?

Mogley

Yes you are correct. The deposit would be £12k total and be a 12% deposit. This is the frustration people have with the HTB ISA. Effectively all the government are doing is giving you a contribution to the value of your house of 20% of the value you've saved in a HTB ISA. It does not help when you actually need it at the point of exchange of contracts. In the long term it is equity given for free by the government.

GLM71093

Hi,
Me and my partner just brought our first house two weeks ago. We initially thought we could use the 'bonus' as a part of our deposit too but couldn't. Our solicitor applied for the bonus for us and then put it towards what we was paying them. So we never saw the bonus but it did mean our solicitors bill was £1,100(ish) lower than we originally thought.

Hope this helps

Thrugelmir

chamelious wrote: »

Fair enough. I guess i join a large community of first time buyers frustrated by this.

Frustration or impatience. :think:

ticklemeellen

Hi, just thought I would put some advice in. Myself and my partner have been paying into a help to buy ISA with Halifax which is only in his name as I have a flat already. We went to a Bank of Scotland branch today to ask to close ISA account and move funds to his bank account. We clearly stated we needed the closure document as this was needed by our solicitor to claim the bonus. The cashier has subsequently transferred our savings and then closed the account with a final balance of £65 for the interest. We didn't realise until we got home that this was incorrect, went back to the bank who said that as the account was closed they wouldnt be able to help us and we might have more success coming back tomorrow! In fact the manager in branch seemed to feel this was our fault for not knowing how the account should be closed!

So! As it stands we have lost out on the bonus we would have been receiving post completion. My partner has phoned Halifax who say they can't understand why they would have done this and they would have to raise a complaint. So my advice is if you are looking to close and get the summary for your account be extra vigilent as perhaps branch staff don't fully understand the process for closing the account and releasing funds.

neo2020

We are in the process of making a purchase and my understanding is that the best thing to do is to get your solicitor to negotiate a smaller exchange deposit.

In our case, 10% would be 20,000, and the government bonus on 2 HTB ISAs with 3,200 each will be £1600, in other words we're asking to reduce the exchange deposit from 20,000 to 18,400 - not a huge ask.

moo313

neo2020 wrote: »

We are in the process of making a purchase and my understanding is that the best thing to do is to get your solicitor to negotiate a smaller exchange deposit.

In our case, 10% would be 20,000, and the government bonus on 2 HTB ISAs with 3,200 each will be £1600, in other words we're asking to reduce the exchange deposit from 20,000 to 18,400 - not a huge ask.

Thats what I exactly did. I was asked to stump up for a 10% deposit at exchange. Which was £6k (I am going down the shared ownership route).

As the MSE article on the HTB ISA clearly stated. I explained to my solicitor that I didn't realise that the bonus was paid out at completion. So I requested that is there any way of paying £4k instead and I'll pay the remainder at completion. (which is £1600 plus the £400 bonus) The my solicitor contacted the sellers solicitor and they agreed to accept the lower amount.

As long you are open and honest about the HTB ISA with your solicitor and tell them at a early stage you are reliant on the bonus make up for the shortfall in the deposit. I doubt a seller will put out of a sale because of it.