Help 2 Buy ISA bonus help

Jimmyben · 16 September 2019 at 7:24AM

Thanks for reading and hopefully helping,

My partner and I are in the process of buying our first house together and I’m not sure how the bonus is going to work. I’ll use different but similar figures than our own, but let’s say we’re buying a property worth £100k, I have £10k in my ISA and a family member is gifting us £20k as a gift, so an actual mortgage worth £70k.

I’m more than aware that the ISA bonus cant be used for the exchange deposit. My solicitor has confirmed that the bonus of £2.5k will be used at completion towards the purchase. However, which figure changes? My solicitor nor case case manager can answer. My original mortgage advisor is hopefully giving me a call today but I’m not confident they will be able to answer me either.

What I mean is, once the bonus is used, will we then have a £32.5k deposit with only a £67.5k mortgage? I can’t imagine the lender would like that.

Can we reduce the gifted deposit amount we’ve specified to the lender and solicitor and use the bonus instead. So my £10k saving, £2.5k bonus and then only £17.5k of the gift used?

Is there another way?

Our mortgage advisor specified that we could only apply for the mortgage using deposit for money we actually had in accounts, so that’s why the gift wasn’t taken into account for the application. We could have, however, used other savings to show we had the £2.5k and then substituted it for the bonus at completion, perhaps that’s what is supposed to happen. Mortgage advisor was well aware we had other savings worth more than £2.5k but didn’t mention anything.

Any help would be greatly appreciated!

eskbanker · 16 September 2019 at 10:28AM

You can carve it up however you choose, subject to the HTB ISA bonus money being put towards the purchase itself (i.e. not for ancillary fees or going back into your savings), and the consent of your lender as to how you structure your financing.

Assuming you're using a solicitor who is qualified to process HTB-assisted purchases (have you checked this?), they should be able to advise you based on your actual figures, but if they're unwilling to do so then the mortgage advisor should be able to help....

Not sure why you'd feel that the lender wouldn't like lending you a slightly smaller amount than you'd previously discussed - it's perfectly normal for actual mortgage amounts to be varied in the lead-up to purchases, not least because in most cases mortgage offers will be in place before the actual purchase price is known.

D.L · 16 September 2019 at 10:40AM

You will need to pay your solicitor at completion purchase price (less your mortgage) + stamp duty + conveyancing fees. You don't need to strictly define what the money goes toward, you should get an overall bill from the conveyancer which will state the amount owed already including your Help to Buy ISA amount. When it comes to actually paying, you don't have to specify what amount was a gift, what amount was your own savings - it all just goes into one big pot.

eskbanker · 16 September 2019 at 11:38AM

D.L wrote: »

You will need to pay your solicitor at completion purchase price (less your mortgage) + stamp duty + conveyancing fees. You don't need to strictly define what the money goes toward, you should get an overall bill from the conveyancer which will state the amount owed already including your Help to Buy ISA amount. When it comes to actually paying, you don't have to specify what amount was a gift, what amount was your own savings - it all just goes into one big pot.

Just to be clear, as per my previous post, the HTB ISA scheme rules are clear that the bonus money must go towards the purchase value of the property itself, rather than being used for anything else, although there have been anecdotal reports on here of conveyancers who are prepared to turn a blind eye to that, which obviously poses the question of which other rules they'd be willing to break....

Subclause 7.6 (A) (v) of https://www.helptobuy.gov.uk/documents/2015/12/scheme-rules.pdf/ confirms that the bonus application must:

include a declaration from the Eligible Conveyancer that:
(a) the entire amount of the Bonus along with any accrued interest will be applied towards the acquisition of the property

Mortgage lenders may impose their own conditions too regarding source of funds, but subject to satisfying both of those requirements, the funding structure can be adjusted to OP's preference.

Jimmyben · 16 September 2019 at 12:13PM

Thanks for the replies Eskbanker, it’s appreciated.

I’ve spoken to my case worker (at the mortgage brokers) and they didn’t seem like they knew exactly what would happen. They said to ask the solicitors, but the solicitors said to ask the brokers so neither seem confident! Although the solicitor was clear it must be used for the purchase at completion so thankfully there’s nothing dodgy going on there.

From what I understood from the conversation with the broker:

- The mortgage amount must be the same as what we’ve applied for, so in the hypothetical case above, £70k

- We can reduce the amount of gifted deposit so that any more money added to the ISA throughout the application process (I want to keep adding as every month is £200, so an extra £50 in bonus money) and the bonus can be used towards the purchase

I’m not sure what would happen if we didn’t have a gifted deposit we could reduce to keep the overall deposit the same.

Fingers crossed everything goes smoothly towards completion!

Help 2 Buy ISA bonus help

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