Help to Buy ISA Bonus

DJM188

I currently have £5000 in my help to buy isa. The deposit i will be placing on the house i have bought will be £4500.

As i understand it, the bonus will be payed to my solicitors. What can i use this bonus for? I have seen contradicting claims.

Also should i keep putting money into the isa even though i already have more than my deposit?

Thanks

8ofspades

-deleting this as I forgot our situation was unique and therefore the information was off- Sorry!

Alexland

To be clear the HTB ISA bonus cannot be used towards the exchange of contract deposit but must go towards the property purchase at completion (so forms part of the overall mortgage deposit). You can use the HTB ISA withdrawn balance towards either deposit.

For example you might have a 10% exchange deposit (inc HTB ISA withdrawn balance) on the property, add a further 5% at completion (inc HTB ISA bonus) and then take out a mortgage for the remaining 85%.

From the seller's perspective the exchange deposit was 10% but from the lender's perspective the mortgage deposit was 15% so 85% LTV.

Sometimes if you exchange and complete on the same day the exchange deposit never gets transfered seperately and the solicitors just send the seller the entire amount in one transaction.

Alex

8ofspades

Alexland wrote: »

To be clear the HTB ISA bonus cannot be used towards the exchange of contract deposit but must go towards the property purchase at completion (so forms part of the overall mortgage deposit). You can use the HTB ISA withdrawn balance towards either deposit.

For example you might have a 10% exchange deposit (inc HTB ISA withdrawn balance) on the property, add a further 5% at completion (inc HTB ISA bonus) and then take out a mortgage for the remaining 85%.

From the seller's perspective the exchange deposit was 10% but from the lender's perspective the mortgage deposit was 15% so 85% LTV.

Sometimes if you exchange and complete on the same day the exchange deposit never gets transfered seperately and the solicitors just send the seller the entire amount in one transaction.

Alex

That's right, sorry I got it a bit wrong up there. We bought a new build that wasn't built so didn't exchange on our deposit - everything was included in one transaction.

Alexland

8ofspades wrote: »

That's right, sorry I got it a bit wrong up there. We bought a new build that wasn't built so didn't exchange on our deposit - everything was included in one transaction.

I've never bought a new build but don't they ask for a token circa £500 exchange of contracts deposit? Or maybe that's just a pre-exchange reservation fee, as you wouldn't exchange contracts until your solicitors had done searches, and then exchange and complete on the same day? I am aware they often tie you into their variable completion date so to make this enforcable maybe you exchange contracts with no deposit along the way after the reservation but before completion?

8ofspades

Alexland wrote: »

I've never bought a new build but don't they ask for a token circa £500 exchange of contracts deposit? Or maybe that's just a pre-exchange reservation fee, as you wouldn't exchange contracts until your solicitors had done searches, and then exchange and complete on the same day? I am aware they often tie you into their variable completion date so to make this enforcable maybe you exchange contracts with no deposit along the way after the reservation but before completion?

We paid a £500 reservation fee, then when they wanted us to exchange ~28 days later, we asked our solicitors and they arranged with the developers to exchange on the reservation fee so we could continue saving in our ISA (there was about 6-8 months before we were due to complete). We then transferred our deposit to the solicitor about 3 days before completion.

DJM188

I've been told by a few people who have used HTB ISA in the past that they could spend the bonus on whatever they wanted. Solicitors fee's, furniture etc.

Has something changed in the last couple of years?

8ofspades

You never see the bonus, the solicitor applies for it, it is sent to your solicitor and your solicitor includes it in the money sent on completion. Pretty sure it hasn't changed.

I don't understand why you'd place less deposit than you currently have, but you really ought to talk to your solicitor about options.
According to the Help to Buy ISA webpage, there's a possibility you could exchange on the deposit less the bonus (potentially meaning you could hold back the excess deposit to use towards fees, rather than using the bonus), but I'm not sure where you stand on claiming a bonus on a deposit greater than you use - I guess the only way around that would be, to work out what the deposit would be less the 25% bonus to make the entire sum £4500, cash out the difference and just claim less bonus (if you can exchange on the deposit less the bonus).
https://www.helptobuy.gov.uk/help-to-buy-isa/faq/#when-is-bonus-paid

Personally, I would be seeking professional advice on the matter - solicitor, mortgage broker or both.