Help to Buy ISA guide
Comments
-
Hi everyone,
So this is my scenario.
Me and my partner have had an off accepted on a house, mortgage offer accepted, 5% deposit, etc.
We both have H2B ISA's. I have been told by many people that once we pay our exchange deposit and apply for our government bonus, this bonus can then be put into our bank accounts, to buy house things (furniture etc).
I have just had an email from our solicitors asking for our ISA info that said "Please note that the bonus can only be used for the payment of the purchase price - not as either part of the deposit or refunded to you after completion".
We are now panicking because we need this money to furnish our house (£1,150). I rang my mortgage broker and he said that he didn't think it has to be used towards the house and could go into our accounts, and that he's done hundreds before.
After reading loads and receiving that email I am now sure that the bonus needs to go towards the house. But if it can't go towards our exchange deposit (5%) and our lender is loaning us 95% then where is this money going? Our mortgage broker knew we both had ISA's and never factored in the bonus' to the mortgage offer and said he never has done before either.
I am speaking to my solicitors tomorrow (hopefully, they are useless) but I wondered if anyone has been in this situation before.
Can the bonus be transferred into our current accounts after exchanging contracts?
Thanks in advance.
Jamie0 -
No, the bonus has to be paid to the solicitor, so all the people who advised you otherwise were wrong.
Under the rules of the scheme, the solicitor has to declare that the bonus money was contributed to the purchase value of the property, but (anecdotally) some are prepared for it to be fed into the overall solicitor's completion bill that covers their fees, etc, as well as the property deposit.
If yours is able and willing to do that (seems unlikely after that email) then that would give you a bit more flexibility, but if not, then you can only use it to add to the deposit and correspondingly reduce the value of the mortgage, i.e. only draw down 93% (or whatever), rather than the full 95%.0 -
I am quite frankly amazed by this. Pretty much everything I've ever read says the exact opposite: the official information, all media coverage. the MSE guide, banks offering HTB ISAs etc etc. Is it possible the people you've been talking to about this just don't like you very much?I have been told by many people that once we pay our exchange deposit and apply for our government bonus, this bonus can then be put into our bank accounts, to buy house things (furniture etc).
0 -
Thanks for that useless reply.0
-
Hi everyone,
So this is my scenario.
Me and my partner have had an off accepted on a house, mortgage offer accepted, 5% deposit, etc.
We both have H2B ISA's. I have been told by many people that once we pay our exchange deposit and apply for our government bonus, this bonus can then be put into our bank accounts, to buy house things (furniture etc).
I have just had an email from our solicitors asking for our ISA info that said "Please note that the bonus can only be used for the payment of the purchase price - not as either part of the deposit or refunded to you after completion".
We are now panicking because we need this money to furnish our house (£1,150). I rang my mortgage broker and he said that he didn't think it has to be used towards the house and could go into our accounts, and that he's done hundreds before.
After reading loads and receiving that email I am now sure that the bonus needs to go towards the house. But if it can't go towards our exchange deposit (5%) and our lender is loaning us 95% then where is this money going? Our mortgage broker knew we both had ISA's and never factored in the bonus' to the mortgage offer and said he never has done before either.
I am speaking to my solicitors tomorrow (hopefully, they are useless) but I wondered if anyone has been in this situation before.
Can the bonus be transferred into our current accounts after exchanging contracts?
Thanks in advance.
Jamie
Hi everyone,
All sorted!
So, me and my partner will be due back a £1150 bonus from our ISA's.
I rang my lawyer today and she told me that when we exchange contracts I won't actually be putting down 5% (£7250), I'll put down 4.2% (£6100) then when we complete we will use our £1150 bonus and the 95% loan from the bank, meaning the bonus gets used for the purchase price and not the deposit.
This still sounds strange as TECHNICALLY you are using it as part of your deposit, but I guess this is a loophole. I just didn't think I could give less than 5%. But apparently I can. SO although I won't be getting the bonus back, I won't have to put as much towards my deposit, saving me the money
Hopefully this helps someone else. Thanks.
Jamie0 -
This comes down to the ambiguity of the word 'deposit', which causes so much confusion to first time buyers and led to the explanatory info at https://www.moneysavingexpert.com/savings/help-to-buy-ISA/#exchangeHi everyone,
All sorted!
So, me and my partner will be due back a £1150 bonus from our ISA's.
I rang my lawyer today and she told me that when we exchange contracts I won't actually be putting down 5% (£7250), I'll put down 4.2% (£6100) then when we complete we will use our £1150 bonus and the 95% loan from the bank, meaning the bonus gets used for the purchase price and not the deposit.
This still sounds strange as TECHNICALLY you are using it as part of your deposit, but I guess this is a loophole. I just didn't think I could give less than 5%. But apparently I can. SO although I won't be getting the bonus back, I won't have to put as much towards my deposit, saving me the money
Hopefully this helps someone else. Thanks.
Jamie
This clarifies that the HTB ISA bonus can't be used towards the exchange deposit (i.e. the advance downpayment at exchange) but can be used towards the mortgage deposit (i.e. the total amount of equity not being provided by the mortgage lender) at completion.0 -
It's not really a loophole.Hi everyone,
All sorted!
So, me and my partner will be due back a £1150 bonus from our ISA's.
I rang my lawyer today and she told me that when we exchange contracts I won't actually be putting down 5% (£7250), I'll put down 4.2% (£6100) then when we complete we will use our £1150 bonus and the 95% loan from the bank, meaning the bonus gets used for the purchase price and not the deposit.
This still sounds strange as TECHNICALLY you are using it as part of your deposit, but I guess this is a loophole. I just didn't think I could give less than 5%. But apparently I can.
When the rules talk about not being able to use it for your 'deposit' they mean you can't use it for the deposit that you have to give the seller at exchange of contracts. Because at that point you are not buying a property, you are just committing to buy a property subject to the completion terms which won't happen until later. The HTB bonus can only be used for paying for the property on a successful completion.
In this case, the seller decided they were happy to accept a low deposit at the time of exchange, to help you out. So they took 4% up front at exchange and 96% at completion, and you funded the 96% with a 95% mortgage and a 1% HTB bonus.
When the seller agrees to accept a small deposit at the time of exchange (4% instead of 5% or 10%) he is taking a risk that you might fail to complete, and not actually go through with the purchase, leaving him high and dry without much cash in his bank, and needing to sue you for his costs and the problems you cause him. Sometimes, sellers can be in the mood to take a gamble and let you get away with a relatively tiny exchange deposit to help you out. So, you got away with it and he still got paid the 100% in the end, just getting his money later than he was planning
If anyone else was looking to rely on being able to do what you did, they would be well advised to agree it with the seller very early on. For example if you were giving them £12.5k deposit and they were part of a chain and needed to give £25k to the person they were buying from, exchanging contracts on the same day, and then you said you could only made a deposit of £10k after all, they may not have the luxury of being able to say, ok, just give me a lower deposit and we'll exchange anyway. Because the next person in the chain that *they* are buying from, might not budge on the deposit they want to receive, and your seller in the middle doesn't want to take the difference out of his own pocket and have a cashflow problem and bigger risk.
Hopefully this helps someone else. Thanks
Jamie
The industry standard deposit at exchange is 10%. If you're buying with a 95% mortgage you are probably on the small end of the scale in terms of transaction size and deposit size so a seller may be able to afford to let you do just a 5% deposit instead of 10%. But getting the exchange deposit down further - to 4% because you screwed up the HTB ISA mechanics - is not something anyone should be banking on.0 -
bowlhead99 wrote: »It's not really a loophole.
When the rules talk about not being able to use it for your 'deposit' they mean you can't use it for the deposit that you have to give the seller at exchange of contracts. Because at that point you are not buying a property, you are just committing to buy a property subject to the completion terms which won't happen until later. The HTB bonus can only be used for paying for the property on a successful completion.
In this case, the seller decided they were happy to accept a low deposit at the time of exchange, to help you out. So they took 4% up front at exchange and 96% at completion, and you funded the 96% with a 95% mortgage and a 1% HTB bonus.
When the seller agrees to accept a small deposit at the time of exchange (4% instead of 5% or 10%) he is taking a risk that you might fail to complete, and not actually go through with the purchase, leaving him high and dry without much cash in his bank, and needing to sue you for his costs and the problems you cause him. Sometimes, sellers can be in the mood to take a gamble and let you get away with a relatively tiny exchange deposit to help you out. So, you got away with it and he still got paid the 100% in the end, just getting his money later than he was planning
If anyone else was looking to rely on being able to do what you did, they would be well advised to agree it with the seller very early on. For example if you were giving them £12.5k deposit and they were part of a chain and needed to give £25k to the person they were buying from, exchanging contracts on the same day, and then you said you could only made a deposit of £10k after all, they may not have the luxury of being able to say, ok, just give me a lower deposit and we'll exchange anyway. Because the next person in the chain that *they* are buying from, might not budge on the deposit they want to receive, and your seller in the middle doesn't want to take the difference out of his own pocket and have a cashflow problem and bigger risk.
The industry standard deposit at exchange is 10%. If you're buying with a 95% mortgage you are probably on the small end of the scale in terms of transaction size and deposit size so a seller may be able to afford to let you do just a 5% deposit instead of 10%. But getting the exchange deposit down further - to 4% because you screwed up the HTB ISA mechanics - is not something anyone should be banking on.
Alright fella, chill out, I'm just telling people of my experience.0
Categories
- All Categories
- 343.1K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.2K Work, Benefits & Business
- 607.9K Mortgages, Homes & Bills
- 173K Life & Family
- 247.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards