Help to Buy ISA guide

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  • I want to clear something up. I see all the text stating the bonus can be used for deposit at completion. And it can’t be used for solicitor fees, surveys, stamp duty etc. What I want to know is can you keep your bonus if you already have funds for deposit and just use it for post purchase costs I.e pay for removal costs, redecorating or to buy appliances to put in new property? This part I never see explained.
    Cogito ergo sum
  • eskbanker
    eskbanker Posts: 30,394
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    I want to clear something up. I see all the text stating the bonus can be used for deposit at completion. And it can’t be used for solicitor fees, surveys, stamp duty etc. What I want to know is can you keep your bonus if you already have funds for deposit and just use it for post purchase costs I.e pay for removal costs, redecorating or to buy appliances to put in new property? This part I never see explained.
    It's not so much that the bonus can be used for deposit at completion but that it must be used for deposit at completion.

    When applying for the bonus, your conveyancer must formally declare to the scheme administrator that "the entire amount of the Bonus along with any accrued interest will be applied towards the acquisition of the property" (see subclause 7.6.A.v.a of the scheme rules), so it can't be used for anything else.

    However, if you already have enough funds to buy the property, then you can use the bonus in the way it's intended and keep back the equivalent-sized chunk of your own savings for the other items....
  • Thanks, I wasn't 100% sure. I saw some horror stories of people relying on the bonus but it was dependant on whether seller would agree to wait extra day or 2 for bonus to be released at completion. Because of this I wanted to ensure I had enough money to cover just in case. unfortunately this also meant my deposit could have been more...:(
    Cogito ergo sum
  • abdul56
    abdul56 Posts: 47
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    Hello,

    I have a Help to Buy (H2B ISA) ISA, it will reach £12,000 in the next 5 months. I Understand that I cannot pay any more into it, above the £12000 limit. However what happens to the interest on the account, as it will go over the £12000, limit.

    Thanks
  • You can continue to keep paying into your help to buy isa past the £12000. You will still accrue the interest. The only thing that stops is the total bonus you can claim. You will receive £3000 whether you have £12000 or £25000. It caps at £3000
    Cogito ergo sum
  • I wonder if anyone used (or tried to use) HTB ISA to buy a property with price over 250k threshold (272k to be precise) but the property is new build, shared ownership. I want to buy 60% share (worth about 163k mortgage) and on the remaining 108k pay 250£ rent monthly, with 125 years lease. According to offical HTB ISA website faq
    I quote
    "What is the property price cap for shared ownership schemes?
    In the context of shared ownership properties the price cap applies to the full sale price of the property rather than just the share you initially buy. For shared ownership properties the full sale price is a multiple of the equity share you are buying. In practice this means that if you are purchasing a 25% equity share of a property for £50,000, the full sale value is £200,000. Alternatively, your conveyancer can calculate the sale price based on the price paid for the equity share you are buying plus the net present value of rental payments due over the term of the lease.

    You should speak to your solicitor or conveyancer and they will be able to advise you on whether the property you are purchasing is within the price limit and is eligible for a government bonus.
    " end of quote
    hence I should be able to calculate NPV value of 108k, I think its roughly (3% discount, 3k rent yearly, 125 years lease) 85k and together with 163k price of my share it total to 248k, right below limit. I struggled to find any concrete information, old guideline mention the method
    but in the more recent one the section VII has been changed. I've tried to ask developer about it but no-one seems to know, they send me to coveyancer but i don'w want to start process if I cant use HTB ISA (in total in 2 about 20k saved hence potential loss of 5k bonus)
  • The most you can claim is £3k made from £12k savings. In addition to this you can’t put more than £1600 into a HTB isa to start and can only add a maximum of £200 per month. Even if you have £20k saved it can’t go straight into the isa. You would have to slowly build it up which takes time
    Cogito ergo sum
  • masonic
    masonic Posts: 23,062
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    edited 16 December 2019 at 6:46PM
    RobertKr wrote: »
    I wonder if anyone used (or tried to use) HTB ISA to buy a property with price over 250k threshold (272k to be precise) but the property is new build, shared ownership. I want to buy 60% share (worth about 163k mortgage) and on the remaining 108k pay 250£ rent monthly, with 125 years lease. According to offical HTB ISA website faq
    I quote
    "What is the property price cap for shared ownership schemes?
    In the context of shared ownership properties the price cap applies to the full sale price of the property rather than just the share you initially buy. For shared ownership properties the full sale price is a multiple of the equity share you are buying. In practice this means that if you are purchasing a 25% equity share of a property for £50,000, the full sale value is £200,000. Alternatively, your conveyancer can calculate the sale price based on the price paid for the equity share you are buying plus the net present value of rental payments due over the term of the lease.

    You should speak to your solicitor or conveyancer and they will be able to advise you on whether the property you are purchasing is within the price limit and is eligible for a government bonus.
    " end of quote
    hence I should be able to calculate NPV value of 108k, I think its roughly (3% discount, 3k rent yearly, 125 years lease) 85k and together with 163k price of my share it total to 248k, right below limit. I struggled to find any concrete information, old guideline mention the method
    but in the more recent one the section VII has been changed. I've tried to ask developer about it but no-one seems to know, they send me to coveyancer but i don'w want to start process if I cant use HTB ISA (in total in 2 about 20k saved hence potential loss of 5k bonus)
    You will need to find a conveyancer that (A) understands this and (B) agrees with your calculation methodology.

    I'm just speculating, but it is probably going to be easiest to convince a conveyancer to use the same NPV calculation that is used for stamp duty. Details are here: https://www.gov.uk/guidance/stamp-duty-land-tax-leasehold-purchases#NPV

    Plugging your numbers into the calculator linked on that page, it pretty much agrees with your NPV calculation (£84,551), so it looks like you can make a fairly convincing case for being under the threshold despite the total value of the property being above it.

    See also this clarification of the scheme rules - the relevant section for you is “Shared Ownership Arrangement”: https://www.helptobuy.gov.uk/documents/2016/11/clarification-to-the-scheme-rules.pdf/
  • Just to update everybody on the shared ownership HTB ISA threshold, I've got an opinion from one lawyer who told me that the threshold is fixed at 250k, and from another (recommended by developer, PLS solicitors who told me that I can use isa as long as NPV value od shared part takes me below 250k limit. What is more important I received the same replay from scheme administrator:
    As discussed, I can confirm that you can work out the purchase price either way as per the FAQ you have quoted from our website.

    So for clarity, in the context of shared ownership properties, the price cap applies to the full sale price of the property rather than just the share you initially buy. For shared ownership properties the full sale price is a multiple of the equity share you are buying. In practice this means that if you are purchasing a 25% equity share of a property for £50,000, the full sale value is £200,000.

    "
    As I said, if for example the full sale value as per the above was above the price cap, you can work out the purchase price a different way. This is where the next part of the FAQ is relevant. You can also calculate the sale price based on the price paid for the equity share you are buying plus the net present value of rental payments due over the term of the lease. If you work out the purchase price via this method and the combined amount of the equity share being purchased, plus the net present value of rental payments over the term of the lease is within the price cap then the purchase would be eligible.

    If you require anything further, please do not hesitate to contact us.

    Kind Regards

    Administrator of the Help to Buy: ISA scheme
    "
    Hence it seems to be possible to use HTB ISA for properties with shared ownership valued at more then 250k.
    hope it helps someone
  • eskbanker wrote: »
    Yes, there's no obligation to use the money towards a property (although you'd miss out on the bonus by not doing so) - it's an easy-access account with no withdrawal penalties (unlike the Lifetime ISA) and so if you are eligible to open one then it is indeed a relatively generous savings account.
    Hi again Eskbanker.
    Feedback: I took out the H2B ISA with Barclays after your reply and have put in the maximum amount possible so far :)

    Question: I have spoken to a few others with H2B Isas and they have said that while the bank interest still shows up in the account, you can not take it out. If you choose to withdraw money from the account, you can only take out the amount you have put in. Is this right or does the 11p interest belong to me to take out whenever I please? I did speak to Barclays and they weren't helpful on the matter.

    Thanks again, Mark
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