Help to Buy ISA query 13 June 2022 at 2:35PM in ISAs & tax-free savings 5 replies 51 views

Maryrigby

My son is buying an £110,000 flat for which he has the 10% deposit of £11,000 saved in a HTB ISA. 

He has been told that the sale is likely to take 3 to 4 months to complete.  If he continues to save £200 per month, will he get tbe bonus on the whole lot or only on the £11,000 which is the deposit amount.

He is aware that the solicitor applies for the bonus, but no one seems to know the answer about the rest of the savings.

Can anyone help please?

Many thanks

Mary 




 
 

eskbanker

The whole balance up to £12K qualifies for a bonus, but that bonus must all be claimed and used at completion towards the price of the property.

Maryrigby

Sorry, I still don't understand.  If he is able to save the full £12,000 before completion but the mortgage lender only requires a 10% deposit which is £11,000 what can he do with the £1,000 that's left and the bonus of £3,000.  Does that too finally have to come off the mortgage therefore making it a £15,000 deposit against a £110,000 property?

His advisor thought he could put it towards fees but I have read elsewhere that he can't.  So does he also need to save for fees on top of this.  If so would he be better to save elswhere for the fees and just leave the £11,000  for the deposit

I am very confused!   

eskbanker

The bonus must go towards the property value, not fees, so if he has £11K in his HTB ISA and doesn't want to pay anything more than that for the property deposit but doesn't have money saved for fees, etc, he could withdraw £2,200 from the HTB ISA, leaving £8,800 in there, which would be topped up at completion with the 25% bonus to constitute the deposit.

The withdrawn £2,200, plus anything else he saves between now and completion, can go towards fees or anything else he chooses to spend it on.

Maryrigby

Eskbanker!  You are a wonder!  I was beginning to speculate that that was the answer, but didn't trust myself to have come to the right conclusion!

I can't thank you enough..... 

Regards 
Mary

masonic

eskbanker said:

The bonus must go towards the property value, not fees, so if he has £11K in his HTB ISA and doesn't want to pay anything more than that for the property deposit but doesn't have money saved for fees, etc, he could withdraw £2,200 from the HTB ISA, leaving £8,800 in there, which would be topped up at completion with the 25% bonus to constitute the deposit.

The withdrawn £2,200, plus anything else he saves between now and completion, can go towards fees or anything else he chooses to spend it on.

This would be a sub-optimal way to go about it, as it will reduce the bonus received. Say the balance gets up to £11.6k due to continuing to save for 3 months. The account can be closed, with the closing statement reflecting the £11.6k (+interest). The bonus can be claimed using the closure letter and would amount to £2.9k. The bonus must be used towards completion, transfer £8.1k from the closing balance to your solicitor to combine with the £2.9k bonus money to form the mortgage deposit. The remaining £3.5k (+interest) can be used for anything he likes, such as fees, redecoration, furniture, or a nice holiday.