Help To Buy ISA Bonus

[Candyfloss99]

Please can someone help me with what my Help To Buy ISA Bonus can be used for? I will be getting the full £3000, but I have just read the paragraph below on the website and now I am so confused as to what I can actually use it for? Thanks.

"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."

As I understand it the help to buy isa is transferred at completion. The newer lifetime isa can be transferred at exchange or completion. Correct me if I’m wrong.

The bonus is paid to be part of the money you give the buyer on completion. You can’t use the bonus to pay the deposit when you exchange contracts.

You need to have a fund available to pay the deposit.

So you pay:
Deposit, usually 10% of purchase price. To pay this you will use your ISA savings, other savings, etc but NOT the Gvt bonus.

Balance: (on completion): mortgage funds, the Gvt bonus and any other money you are using to buy your house.

That’s what I take it to mean, anyway.

Yes, UpTheJunktion is correct

Oh I see thank you. So if I've got a 15% deposit it can count towards that but couldn't count if I only had a 10% deposit?

You can't use the bonus towards your deposit at all, it can only be used once you've made the purchase.

Oh right. Even if I've told the mortgage company I've got 15% deposit but the sellers only want 10% deposit on exchange. Are these separate deposits or the same? Or am I confused about what the deposit actually is?

@Candyfloss99

Oh right. Even if I've told the mortgage company I've got 15% deposit but the sellers only want 10% deposit on exchange. Are these separate deposits or the same? Or am I confused about what the deposit actually is?

I don't know why you've told the mortgage company that, surely it's not up to the sellers how much deposit you are putting down for your mortgage? The bonus can't be used towards your deposit, either way.

No you are confusing the deposit that is actually paid to the buyer (generally 10% but often less) on exchange with the deposit that the mortgage company requires you to put towards the mortgage.

So basically it can be used to make up the shortfall between purchase price and mortgage advance but it can't be paid over in advance of completion (so it can't be the deposit paid to the buyer on exchange).

So (made up figures) if a house was 100k, 10% deposit required, and I had 8k deposit + 2k bonus pending, I wouldn't be able to proceed unless I found the 2k difference? And the mortgage would then be 88k instead of 90k?

I really don't understand the 2 deposit part 😬

You agree your deposit with the bank when you agree a mortgage in principle. The mortgage in principle tells you the upper limit you can afford and what your maximum offer will be. The sellers have no say on what your deposit is, the bank does.

The help to buy bonus cannot be used towards the deposit. So if your deposit is £10,000 you need that £10,000 in your savings and ISA when you make an offer. This money will be transferred when you complete on the house. The bank will transfer the remainder of the money, this is your mortgage. The bonus is paid back to you after completion and can go towards things you need for your new house, furniture, repairs you need to get done straight away or to help with your first mortgage payment. Your first mortgage payment will be higher than your agreed amounts. We were able to use our help to buy bonus to pay the solicitors fees.

I think you're getting the deposit required on exchange and the deposit required by your mortgage lender confused.

When you put the offer in, the lender said they'd lend you eg. 100k. If the purchase price is 150k then you need to find the other 50k plus fees and disbursements. This is your "deposit" as the mortgage lender would see it.

On exchange of contracts, the contract will say you need to provide a deposit of 10% of the purchase price, so in the example above, that would be 15k. You can't use the HTB bonus for that, but you can use the money you have saved in the ISA towards it.

Your solicitor will apply for the bonus once they have the HTB ISA closing statement and first time buyer declaration from you. They apply through a HTB portal and the funds are usually released directly to the solicitors client account the day before completion.

So if purchase price is 150k
Mortgage is 100k
You are contributing 50k in total (forget about fees etc for this example) but know you are getting a 3k HTB bonus.
You transfer 15k to solicitors for the 10% deposit required on exchange of contracts. This can include the money in your ISA but not the bonus.
Contracts exchanged.
You transfer the rest of the money the solicitor needs from you for completion, which is 50k, less the 3k bonus you know is coming from HTB, less the 15k you have already paid on exchange, which comes to 32k
Solicitor applies for HTB bonus and gets the 3k into their account the day before completion.

So on completion the solicitor has the following in their client account:

Mortgage advance = 100k
Exchange deposit = 15k
Completion money from you = 32k
HTB bonus = 3k

Total = 150k which is the full purchase price of the house.

Hope that makes sense!

I don't think what inthenight says is right.

When you buy a house you pay a deposit on exchange of contracts to show the vendor you are interested and not messing around. This is paid when you exchange contracts (and essentially become committed to the purchase). Historically people used to pay the vendor 10% but it is often less. I'm going to call this the "buyers deposit". The buyers deposit has nothing to do with your mortgage. After exchange the mortgage company sends the advance to your solicitor. This is for the purchase price less your purchase deposit (essentially your equity in the house on day 1). You need to make up the shortfall between the amount you have mortgaged and the purchase price. You can use your bonus for this. And obviously the buyers deposit paid to the vendor on exchange turns into purchase monies paid in advance.

So whatever you do don't agree to a buyers deposit that includes your bonus. But the bonus can be put towards the purchase price paid on completion.

@finallymightbehappening

So basically it can be used to make up the shortfall between purchase price and mortgage advance but it can't be paid over in advance of completion (so it can't be the deposit paid to the buyer on exchange).

I understand now thank you. I didn't even know I had to pay a deposit to buyer until this thread. Thank you.

@Eggsley

I think you're getting the deposit required on exchange and the deposit required by your mortgage lender confused.

When you put the offer in, the lender said they'd lend you eg. 100k. If the purchase price is 150k then you need to find the other 50k plus fees and disbursements. This is your "deposit" as the mortgage lender would see it.

On exchange of contracts, the contract will say you need to provide a deposit of 10% of the purchase price, so in the example above, that would be 15k. You can't use the HTB bonus for that, but you can use the money you have saved in the ISA towards it.

Your solicitor will apply for the bonus once they have the HTB ISA closing statement and first time buyer declaration from you. They apply through a HTB portal and the funds are usually released directly to the solicitors client account the day before completion.

So if purchase price is 150k
Mortgage is 100k
You are contributing 50k in total (forget about fees etc for this example) but know you are getting a 3k HTB bonus.
You transfer 15k to solicitors for the 10% deposit required on exchange of contracts. This can include the money in your ISA but not the bonus.
Contracts exchanged.
You transfer the rest of the money the solicitor needs from you for completion, which is 50k, less the 3k bonus you know is coming from HTB, less the 15k you have already paid on exchange, which comes to 32k
Solicitor applies for HTB bonus and gets the 3k into their account the day before completion.

So on completion the solicitor has the following in their client account:

Mortgage advance = 100k
Exchange deposit = 15k
Completion money from you = 32k
HTB bonus = 3k

Total = 150k which is the full purchase price of the house.

Hope that makes sense!

You're right I was getting them mixed up. Thank you for the comprehensive explanation.

@finallymightbehappening

I don't think what inthenight says is right.

When you buy a house you pay a deposit on exchange of contracts to show the vendor you are interested and not messing around. This is paid when you exchange contracts (and essentially become committed to the purchase). Historically people used to pay the vendor 10% but it is often less. I'm going to call this the "buyers deposit". The buyers deposit has nothing to do with your mortgage. After exchange the mortgage company sends the advance to your solicitor. This is for the purchase price less your purchase deposit (essentially your equity in the house on day 1). You need to make up the shortfall between the amount you have mortgaged and the purchase price. You can use your bonus for this. And obviously the buyers deposit paid to the vendor on exchange turns into purchase monies paid in advance.

So whatever you do don't agree to a buyers deposit that includes your bonus. But the bonus can be put towards the purchase price paid on completion.

I get it now thanks for explaining.