Help to Buy ISA query

bambamboo

Hi all,

Apologies if this has been asked before, I did do a forum search but I'm still confused.

My partner and I are looking to buy our first home, we both have £3k in our HTB ISAs which will bring in a £1.5k bonus. We're looking at getting a 95% mortgage utilising the £6k + other savings as the deposit as I know the government bonus can't be used for this. I've read many articles about it and they all say that the bonus can go towards the purchase price on completion. What exactly does that mean? That we take £1.5k off the mortgage that we want? Or does it get paid out as a lump sum to the mortgage company?

The mortgage that we're applying for is £150000 but would we technically only have to borrow £148500?

I'm so confused (sorry)

I don't know if this makes any difference but we're buying in Scotland.

Thanks in advance for any advice, this is all very new to us!

kingstreet

It doesn't affect the mortgage.

The solicitor gets the money and uses it towards the final completion balance which includes solicitor fees, stamp duty etc.

if you think about it, you use your fee money to cover the deposit, then the bonus comes and replaces it.

bambamboo

I thought it wasn't allowed to be used for fees, stamp duty etc? That's one of the FAQs on the HTB website.

stevenhp1987

bambamboo wrote: »

I thought it wasn't allowed to be used for fees, stamp duty etc? That's one of the FAQs on the HTB website.

It technically doesn't.

In this situation the bonus money "releases" some of your original deposit back (by replacing it), which is then used to cover fees.

bambamboo

Thanks both.

So we put the money that we've set aside for the fees towards our 5% deposit instead and the bonus is used to offset these later down the line?

Dawnue1985

So can you use the bonus as part of the deposit??

vapourA

The bonus cannot be claimed ready for the exchange stage and therefore cannot be used as part of the deposit, so you need to have the cash yourself for the deposit and then you get the bonus funds back later.
As Kingstreet advises, it is normally deducted from the final balance statement for completion.

Zeni

This is something that has been confusing me too! I understand that the money gets paid at completion but I thought it gets paid towards the house so in my mind possibly paid off a small part of the mortgage or does it go to a solicitor? It's hard to find a definitive answer.

kingstreet

bambamboo wrote: »

Thanks both.

So we put the money that we've set aside for the fees towards our 5% deposit instead and the bonus is used to offset these later down the line?

Yes. That is correct.

elly.alice

Glad it's not just me who's super confused - so we have our final balance statement for deposit and fees deposit was £18,500 and with fees etc on top comes to just over £20,000 - so the money in our HTB ISA's + the eventual bonus will go straight to our solicitor to pay the fees (but not the deposit - know that bit)

OK so, we have more in our HTB than the fees are going to cost - where does that money then go?

kingstreet

It's really not that difficult.

Over the purchase period, various sums are going to come in to your solicitor;-

your ISA investment/deposit
your mortgage funds
your ISA bonus
your payment for fees, stamp duty etc.

It's all going in to the overall pool of purchase monies.

At various times, payments are going to go out. To the vendor's solicitor, to HMRC, for searches, to the solicitor for fees and so on.

Everything is accounted for on your completion statement. It doesn't really matter about what a particular payment coming in is used for, as long as the end result is a £0 balance.

If the solicitor will have a surplus at the end, it will be returned to you. If he knows he will have a surplus, the amount requested from you to balance the account may well be reduced, so you actually hand over less in the first place.