Help to Buy ISA - maximum number of new buyers for one propery

epicurus

Hi. I'm struggling to find any clear guidance on what is the maximum number of first time buyers can jointly buy a property using the Help to Buy ISA scheme. I am a first time buyer and as is my sister and also my parents. is it possible for all of us to take out the Help to Buy ISAs and jointly buy the property, I would be the only one living in it though and would plan to pay all of the deposit. I would buy them out soon after completion.

Any advice appreciated.

Thanks

jimjames

Do they all qualify as first time buyers? Or have your parents already got a house?

bowlhead99

I seem to remember the max number of owners registered at land registry is 4, after that you would be looking at having one or more of the first four legal owners use a trust arrangement to look after the beneficial interests of anyone else.

You couldn't pay all the deposit yourself, because you would need all the other people to pay their helptobuy isa money and their bonuses on their helptobuy isa money as part of the money that went to the seller. This assumes the bonus money is available to all of them (i.e. because none of them have ever had an ownership interest in residential property anywhere in the world). By contributing money to the purchase price they would all become owners. Your mortgage lender would need to get all the credit details and run affordability for all the investors as they would all be jointly and severally liable for the entire debt. You could however do a deed of trust which set out how much equity would be owned by each.

When you later purchase the other three quarters of the property from the other buyers you would potentially need to consider stamp duty again, even though you had all just paid the full amount of stamp on the whole property, because the three quarters of the value of the property that you were then acquiring from them is likely in itself still over the stamp duty threshold.

Also, if your parents or sister ever wanted to get on the property ladder(in your sister's case, depending on her age, say by accumulating £40k in a LISA over the next decade and getting £10k bonus on it), the bonus would be denied to them on the basis that she had already been an owner of residential property at some point in the past -even if only for a couple of months.

Obviously you would need legal advice to set up the Dec of trust for the initial arrangement, as well as needing professional advice and conveyancing to handle the later transfer of equity. When you did that later transfer of equity you would also need your lender to approve the transfer and taking those other people's interests off the mortgage. And if the lender's criteria had changed for any reason whatsoever, they may not consent to you taking over the mortgage on your own, even if they might have accepted it originally if you had applied as a solo applicant.

Oh, and either way, all your credit files would be linked for the next six years until their joint mortgage with you drops off their record.

Overall, it seems a lot and effort and expense to scam a bit extra bonus off the government.

epicurus

Thanks for the great analysis. So as I understand it all joint owners would only be allowed to own an equal share in the property rather than a variety of percentages?

bowlhead99

No, they could own a variety of percentages. But for example, you couldn't have someone putting money in to purchase the property and take zero share of the property, because the helptobuy isa rules only allow that person to get a bonus when they buy property with their ISA.

And the mortgage lender won't lend against a property that has multiple owners without making them all jointly liable for the mortgage. That doesn't mean your sister is 'responsible for an equal share' of the mortgage, or some lower share if she only owned a low percentage of the house; it means she is liable for 100% of the mortgage if you and your parents don't pay it. She's only off the hook after you have bought her out of her share (which you can only do by getting conveyancing solicitors involved and getting the mortgage company to agree that the remaining owners can support the mortgage without her).

So you would end up jumping through a lot of hoops to get deal done legally in a way that everyone's happy with, and for example you'll likely need to see lenders in person (or use a broker) rather than doing an online application as the online mortgage applications only usually accept the details of two joint purchasers.

The amount of bonus available with HTB is relatively small. If both your parents and sister all stuck £1200 into HTB ISAs tomorrow you could 'cash out' next week to buy a property and their combined £3600 would get you £900 of bonus, which is easily eaten up by all the extra steps to do multiple purchases and transfers of equity with lenders and law firms. Obviously if they are going to keep feeding the HTB ISAs for several years then you can end up with more money in the bonus-able pot - £9k of bonus between 3 of them - but you may find that after that time period your property of choice has gone up by a lot more than £9k, and you will still have all the hoops to jump through which come with the convoluted set of changes of ownership.

eskbanker

bowlhead99 wrote: »

If both your parents and sister all stuck £1200 into HTB ISAs tomorrow you could 'cash out' next week to buy a property and their combined £3600 would get you £900 of bonus, which is easily eaten up by all the extra steps to do multiple purchases and transfers of equity with lenders and law firms.

A minor point of detail from the scheme rules: you can only cash out for a bonus after saving £1,600 in each account, so not literally next week.

Agree with everything else in that post though!