Help to Buy ISA - How to use the bonus?

machiavellie

I'm getting conflicting advice from people on what I can use my HTB ISA Bonus for.

All the official documentation I can find suggests that it can't be used for the initial house deposit nor solicitors fees, so how do I use it?

I'll admit it's my fault I didn't check the wording correctly before submitting my mortgage application, but I applied for (and have been approved for) the full cost of the house purchase minus 10% (so 90 LTV).

How can I use the HTB bonus when I can't use it for the deposit?

simon_or

You can use it towards the purchase but not towards the deposit due at exchange, your solicitor will sort out the nitty gritty of it (and charge you for that privilege). Speak to them and they'll tell you how it works.

Usually the solicitors will just agree a smaller deposit on exchange than they usually would (say for a low LTV application).

Will my bonus contribute towards the deposit to buy my home?

Yes, the government bonus will be added towards your overall deposit. It won’t help towards your home exchange deposit.

When your solicitor or conveyancer should apply - Instruct your solicitor or conveyancer to apply for your government bonus once your offer to purchase a property has been accepted. This means that your solicitor or conveyancer will claim the bonus between the exchange and completion of your home purchase.

machiavellie

Okay thanks! I have contacted my solicitor but as fairly standard he is a bit slow to respond, and was just confused if i've left it too late since the mortgage is already in place.

I think it'll probably have to be what you initially first suggested, instead of paying 10% deposit on exchange I maybe pay 9% and the rest comes from the mortgage + the bonus.

Luckily it's a private sale between family so there shouldn't be too much issue asking for this.

kingstreet

In reality, the bonus comes in to the pool of completion funds and pays the legal costs.

simon_or

machiavellie said:

Okay thanks! I have contacted my solicitor but as fairly standard he is a bit slow to respond, and was just confused if i've left it too late since the mortgage is already in place.

I think it'll probably have to be what you initially first suggested, instead of paying 10% deposit on exchange I maybe pay 9% and the rest comes from the mortgage + the bonus.

Luckily it's a private sale between family so there shouldn't be too much issue asking for this.

Don't worry about it at all, the solicitor will be familiar with how everything works with an HTBISA and a high LTV mortgage.

If this was a problem, no one would be able to buy a house with a 95% LTV mortgage, let alone the new Skipton 100% LTV mortgage!

KSS1991

We just claimed the HTB ISA this week actually! Once Ive sent the closing statement and closing letter from the bank to the solicitor they produced a final completion statement of what I need to pay them on exchange. So it was: the 10% deposit + solicitors fees - ISA bonus. So I am in reality due to pay them less than the orginal 10% deposit. 

machiavellie

Ah okay, so you paid your solicitors fees at the same time as your deposit! That makes sense, I was wondering how I was able to do it if i couldn't pay the solicitors fees with the bonus, but that makes perfect sense, thanks!

silvercar

There are effectively 2 deposits, the deposit on exchange (generally 10%, but often negotiated downwards) and the deposit that makes up the balance between the buying price and the deposit already paid together with the mortgage. The latter amount is needed before completion. If you don't have a deposit large enough to pay on exchange then people often exchange and complete on the same day. The HTB bonus can only be used for the completion deposit. 

eg purchase price is £200k, mortgage 150k, HTB savings 12k + 3k bonus, other savings 35k.

Deposit paid on exchange comes from "other savings" lets say 20k. For completion you use the remaining savings + mortgage + HTB savings + bonus.

machiavellie

silvercar said:

There are effectively 2 deposits, the deposit on exchange (generally 10%, but often negotiated downwards) and the deposit that makes up the balance between the buying price and the deposit already paid together with the mortgage. The latter amount is needed before completion. If you don't have a deposit large enough to pay on exchange then people often exchange and complete on the same day. The HTB bonus can only be used for the completion deposit. 

eg purchase price is £200k, mortgage 150k, HTB savings 12k + 3k bonus, other savings 35k.

Deposit paid on exchange comes from "other savings" lets say 20k. For completion you use the remaining savings + mortgage + HTB savings + bonus.

What happens then when my LTV is already 10% so my entire contribution is already the 10% deposit - this is what i'm struggling to wrap my head around I guess because how can I use the bonus when my entire LTV deposit will be used for it?

I'm still waiting for my solicitor to get back to me

kingstreet

machiavellie said:

silvercar said:

There are effectively 2 deposits, the deposit on exchange (generally 10%, but often negotiated downwards) and the deposit that makes up the balance between the buying price and the deposit already paid together with the mortgage. The latter amount is needed before completion. If you don't have a deposit large enough to pay on exchange then people often exchange and complete on the same day. The HTB bonus can only be used for the completion deposit. 

eg purchase price is £200k, mortgage 150k, HTB savings 12k + 3k bonus, other savings 35k.

Deposit paid on exchange comes from "other savings" lets say 20k. For completion you use the remaining savings + mortgage + HTB savings + bonus.

What happens then when my LTV is already 10% so my entire contribution is already the 10% deposit - this is what i'm struggling to wrap my head around I guess because how can I use the bonus when my entire LTV deposit will be used for it?

I'm still waiting for my solicitor to get back to me

You'll have the bonus by completion. Your solicitor can exchange with a smaller deposit with the agreement of the other side. The bonus will then be there when it is really needed, at completion where it will make up the necessary 10%.

machiavellie

Okay yeah that’s what I originally thought, a smaller deposit from me initially and then the remainder from
the bonus afterwards with the mortgage funds.

luckily it’s private sale so it should be okay