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Help to buy ISA - Explanation please

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alahol2
alahol2 Posts: 62 Forumite
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in House buying, renting & selling
I have aquaintance who are buying a £240k house with a £24K deposit. They have about £7K in Help to Buy ISAs. They are in the final stages.
The conveyancer wants the deposit (£24K) + some of the conveyancing bill (£1.5K) before exchange, with completion some 7 days later.
As I understand it the conveyancer has to claim the extra 25% from the government on the Help to Buy ISAs.
So can someone explain where that money will go? Will it be paid back to the couple?


Thoroughly confused by the timescales and arithmetic.
Thanks
«1

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  • xylophone
    xylophone Posts: 44,411 Forumite
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    https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/

    Receive bonus: when you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus. Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.
  • alahol2
    alahol2 Posts: 62 Forumite
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    This is the bit I can't get my head around...

    The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.

    They are getting a 90% mortgage, they have closed the HTB ISAs in accordance with the rules and the conveyancer knows to apply for the bonus. So if they give the coveyancer the £24K deposit and have a mortgage for £216K that adds up to the total sale price. So when the conveyancer gets the bonus what happens to it? Should they be getting a mortgage for £216K minus the amount of the bonus? Or should they be paying a deposit of £24K minus the value of the bonus?


    As I say, I'm confused...
  • whatdoyouthink...
    whatdoyouthink... Posts: 125 Forumite
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    For me, my solicitor added the bonus to my completion statement meaning were I was expecting to pay 20K say, for solicitor fees, searches etc etc etc and the deposit, I only had to pay £17k.
  • bopsybunny
    bopsybunny Posts: 109 Forumite
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    edited 19 February 2019 at 11:54AM
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    It's a bit of a grey area. I've heard a few different processes. Mine went like this:

    Once we knew the exchange was imminent, we closed our HTB ISAs and got our closing statements to send to our solicitor. The balance of the accounts (including interest) was paid to our current accounts.

    We then paid 10% deposit out of our savings, which included the money we had saved in the HTB ISAs (Total approx. £17k), plus the value of the bonuses in our HTB ISAs also out of our savings (approx £2k) to go towards mortgage deposit, plus our solicitor's bill (searches, fees etc. approx £2k) straight to the solicitor. So our mortgage amount was the price of the house, minus 10%, minus HTB bonuses.

    Once the sale completed, we each then received a cheque from the solicitor, equal in value to our respective HTB bonuses, as a "refund for our over-payment".

    I believe it can be done in many different ways but this was how ours worked. Only possible of course if you have the value of your bonus in savings. I was told it may speed things up so just went with it.
    Wedding savings Jan 19: £1.4k. Sept 19: £7.5k. Mar 20: £12.6k
    Goal: Pay for wedding by August 2020 <3
  • alahol2
    alahol2 Posts: 62 Forumite
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    Whatdo... and Bopsy...


    Very many thanks, that seems to explain it. I guess the solicitors are having to find a way around the HTB rules.


    So far the process precisely matches Bopsy's experience so we will see how it ends.


    Thanks again.
  • Takmon
    Takmon Posts: 1,738 Forumite
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    I purchased my house with a Help to Buy ISA and i was getting a 90% mortgage.

    My solicitor arranged to pay an exchange deposit of less than 10% taking into account of the bonus that will be available for completion, so i didn't have to pay any extra.
    She did this without me asking, she was pretty good and made extra effort to make the process as easy and quick as possible.
  • alahol2
    alahol2 Posts: 62 Forumite
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    Thanks Takmon, that would be another, maybe better, way round the rules.
    I guess whoever wrote the rules didn't really think about the practical aspects.
    Cheers
  • M2808
    M2808 Posts: 61 Forumite
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    When I did mine I made it clear at every stage I had the 10% minus the amount given by the bonus, which I calculated. E.g. deposit was 12500, here is 10,500, the rest is made up from the HTB ISA bonus (can't remember the exact amount).

    This was fine but if I pulled out between exchange and completion I was still liable for the 12500 so would've had to come up with the other 2000.

    So to summarise, I paid less than 10% and it made the 10% with my bonus.
  • kingstreet
    kingstreet Posts: 38,764 Forumite
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    alahol2 wrote: »
    The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.
    In practice... it is!

    It's been set up in such a way there is little else a solicitor can do but add the bonus to the pool of funds needed for completion and inevitably some of that goes to paying the solicitor fees.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • jesskfawcett
    jesskfawcett Posts: 3 Newbie
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    Hello,

    I'm also worried about claiming my Help to Buy ISA bonus. I closed my Barclays Help to Buy ISA account last Monday as we are due to complete this Friday. I haven't received a closing statement yet, so haven't been able to pass this on to my solicitor.

    When I spoke with Barclays about the timeline, I was told not to worry as 'people usually just use the bonus to buy furniture after completion'. As I'm lucky enough to not need the bonus to pay the funds needed for completion I wasn't too worried initially, but now I'm worried I'm not going to be able to claim it at all!

    Can anyone shed any light on this, and whether it is indeed possible for my solicitor to claim the bonus on my behalf after completion?

    Thanks in advance!
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