Help to buy ISA

Emma_brown96

Hello! So me and my partner are in the process of buying a house (we’re nearly at the exchange on contracts point) and I’m just wondering if anyone actually understand the help to buy isa, because I’m so confused by it all! 

When we applied for our mortgage, we planned for a 10% deposit from our own money to cover the exchange deposit and then added the government bonus on to that to give us our mortgage deposit.  Obviously since we applied we’ve saved more money into our help to buy isas so we’re a bit confused about where the extra bonus goes? We’ve been told by some people that it comes off of our solicitor fees, but the gov website says that isn’t allowed.    We still need the 10% of our own money to cover the exchange deposit, so it’s not like it can be used in place of our own money either  

eskbanker

HTB ISA bonus money needs to go towards the purchase price of the property so you effectively use any surplus to reduce the mortgage below what you'd originally envisaged.

masonic

As eskbanker says, it will be added to your exchange deposit to form your mortgage deposit, which will end up being greater than 10%.

Emma_brown96

masonic said:

As eskbanker says, it will be added to your exchange deposit to form your mortgage deposit, which will end up being greater than 10%.

We planned our mortgage deposit to be higher than our exchange deposit to factor in the bonus, but we’ve saved extra since then so we effectively will have more mortgage than needed now with the bonus (if that actually makes sense). Does the extra bonus just come off of the rest of our mortgage then, sort of like an overpayment? 

eskbanker

Emma_brown96 said:

masonic said:

As eskbanker says, it will be added to your exchange deposit to form your mortgage deposit, which will end up being greater than 10%.

We planned our mortgage deposit to be higher than our exchange deposit to factor in the bonus, but we’ve saved extra since then so we effectively will have more mortgage than needed now with the bonus (if that actually makes sense). Does the extra bonus just come off of the rest of our mortgage then, sort of like an overpayment? 

Yes, now that you have a larger deposit than you'd planned, you just take out a correspondingly smaller mortgage rather than the figure you'd originally agreed with your lender, i.e. if, for the sake of argument, you'd planned to buy a £100K property with a 10% deposit and £90K mortgage, then if you've subsequently saved enough to earn an extra £1K HTB ISA bonus you now only need to take out an £89K mortgage.

masonic

Emma_brown96 said:

masonic said:

As eskbanker says, it will be added to your exchange deposit to form your mortgage deposit, which will end up being greater than 10%.

We planned our mortgage deposit to be higher than our exchange deposit to factor in the bonus, but we’ve saved extra since then so we effectively will have more mortgage than needed now with the bonus (if that actually makes sense). Does the extra bonus just come off of the rest of our mortgage then, sort of like an overpayment? 

It's worth noting that it is only the HTB bonus itself that needs to be included in the mortgage deposit, so if there are any funds from the closing balance of your HTB ISA you've yet to contribute, you could make a deduction from these to balance things out.