First time buying with HTB ISA

Britnall7700

I thought I would open this discussion on the back of watching Martin on TV last night where he mentioned that the HTB ISA can't be used as part of the deposit, but money in a LISA could be.

From the government's Help to Buy website I quote:

Receive bonus: when you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus. Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.

I seem to understand that a HTB ISA bonus cannot be put towards a deposit, but cannot be used for Solicitor or Estate Agent fees. What can it be used for, and how? I'm sorry in advance if some of you already understand this but I have never purchased a property, have never set foot in an Estate Agent, never met with a Solicitor and other than knowing that I want a good deposit to give me a good LTV, and I am saving towards it I do not know the process whatsoever.

For example, if I find a property for sale at £100,000 and I have a £12,000 deposit plus the £3000 bonus then to me I always thought I would have a £15,000 deposit. I understand that Solicitors need involving and paying for completing legalities but what does an Estate Agent need money from the purchaser for?

Thank you

buggy_boy

Britnall7700 wrote: »

I thought I would open this discussion on the back of watching Martin on TV last night where he mentioned that the HTB ISA can't be used as part of the deposit, but money in a LISA could be.

From the government's Help to Buy website I quote:



I seem to understand that a HTB ISA bonus cannot be put towards a deposit, but cannot be used for Solicitor or Estate Agent fees. What can it be used for, and how? I'm sorry in advance if some of you already understand this but I have never purchased a property, have never set foot in an Estate Agent, never met with a Solicitor and other than knowing that I want a good deposit to give me a good LTV, and I am saving towards it I do not know the process whatsoever.

For example, if I find a property for sale at £100,000 and I have a £12,000 deposit plus the £3000 bonus then to me I always thought I would have a £15,000 deposit. I understand that Solicitors need involving and paying for completing legalities but what does an Estate Agent need money from the purchaser for?

Thank you

You are getting slightly confused... Ok if you find a property you want to buy at an agreed price of £100,000 at the time of exchange normally a 10% deposit is required. so would be £10,000. Part of that £10,000 cannot be the bonus as you have not yet legally bought the property and the mortgage is currently not active.... At the point of completion you will need to pay the remaining £90,000, this will in your example be the other £2000 cash, plus the £3000 bonus (can now be used) and the £85,000 mortgage...

For mortgage purposes the bonus can be calculated as a deposit however when a deposit is requested at the time of exchange then no it cannot...

There are ways round this, ask for a reduction of the deposit at exchange or exchange and complete at the same time.

Britnall7700

Thanks for your response.

Okay, so with that example:

I find a property for £100,000 and submit an offer.
Offer is accepted and I then go and approach Mortgage lenders and secure a Mortgage?
A day is chosen upon which £10,000 is paid to the other parties Solicitor via my Solicitor from my £15,000 savings. That is the exchange complete??
On the day of Completion the £2000, £3000 and £85,000 is paid to the other parties Solicitor and I get keys?
I then have to pay my Solicitor for his services?

So I should also be budgeting for Solicitor fee's? Anything else?

buggy_boy

Britnall7700 wrote: »

Thanks for your response.

Okay, so with that example:

I find a property for £100,000 and submit an offer.
Offer is accepted and I then go and approach Mortgage lenders and secure a Mortgage?
A day is chosen upon which £10,000 is paid to the other parties Solicitor via my Solicitor from my £15,000 savings. That is the exchange complete??
On the day of Completion the £2000, £3000 and £85,000 is paid to the other parties Solicitor and I get keys?
I then have to pay my Solicitor for his services?

So I should also be budgeting for Solicitor fee's? Anything else?

Exchange means exchange on contracts so your solicitor gets a copy signed buy the seller and the seller gets a copy signed by you but essentially yes.

Yes on completion, although normally solicitors like to get paid at the same time. Once the money has transferred and been confirmed as received you can get the keys.

alex_163163

Yes this confusion seems to crop up a lot. There is a lot of misinterpretation of the terms ‘deposit’. It kinda of has 2 meanings, although the funds are the same source.
There is the exchange deposit - typically 10% of the purchase price that is due on exchange of contracts to secure/ seal the deal with the vendors. At this point the completion date is set and that is the date you take legal ownership of the property. The iSA bonus cannot be used for this specific deposit.

But it can be used for the mortgage deposit. This is the amount of money you are putting in that doesn’t come from the mortgage lender.

A lot of the confusion comes when buyers only have a 10% deposit, including the bonus, as they haven’t understood they need to see if they can negotiate a lower exchange amount with the vendors.

kingstreet

However much that paragraph of the rules gets pasted on here, in practical terms, the ISA bonus goes into the pool of funds held by the solicitor at completion and it does get used for legal fees and SDLT.

It just isn't specifically earmarked for that use.

Britnall7700

Thanks all for your help, I have given you all thanks feedback. I think my little brain understands it a little more now.

On average, how much would Solicitor fees cost? SDLT as I understand it is only for properties over a certain value. Why would one have to pay an Estate Agent at any stage?

kingstreet

Britnall7700 wrote: »

Why would one have to pay an Estate Agent at any stage?

No idea why it's mentioned.

SDLT now pointless (yes, I did mention it!) as well as the max PP is £250K, below the SDLT threshold for the FTB exemption.

Solicitor, I'd work off £500 + VAT + disbursements but this does depend on where you are and where you are buying.

Britnall7700

Thank you, kingstreet