4

The Help To Buy ISA can't be used for the initial deposit on a house (or rather the Government bonus, the Help To Buy ISA's raison d'etre can't be).

Given that saving the initial deposit is the largest barrier to buying a first home*, what specific problem is the Help To Buy ISA trying to solve?

*I don't have a single good source for this, but it seems to be both logical and widely accepted.

6

Not very well thought out is it?

It does still potentially help with the deposit, but since the government are terrified of you getting the 25% extra without a house to show for it, they have made it so you can use it for completion but not initial deposit at the exchange. Which for the people its trying to help is not convenient at all.

The way round it is having to negotiate through your solicitors to perhaps have the vendor take 8% deposit instead of 10%, with the remainder coming on completion. Which is not ideal, but is possible.

This site has more details:

https://www.moneysavingexpert.com/savings/help-to-buy-ISA#exchange

"While you can use the money you've saved in a Help to Buy ISA towards this exchange, it's only at completion that you receive the mortgage money and Help to Buy ISA bonus; so the bonus won't help towards the home exchange deposit. ... Say you're buying a £100,000 property, and have saved £8,000 in a Help to Buy ISA; with the bonus you'll have £10,000, so a 10% deposit in total. You’d have been able to use your £8,000 at the exchange stage but can only get the additional £2,000 at this point of completion. That helps to reduce the amount you need to borrow and cuts the cost of your mortgage rate too."

  • Thanks, but I'm not really asking how best to make use of one; I'm asking what problem it was intended to solve (as it doesn't solve the stated aim of helping with deposits). – walrus Sep 20 '17 at 12:27
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    I felt that I am answering the question here. It was intended to solve the problem of first time buyers not having enough money for deposits, which it does, but since only on completion, it was badly and ineffectually thought out. Or if you were looking for a more meta answer, it was designed to solve the problem of the government not appearing to care about first time buyers by offering what seems like an amazing deal - 25% bonus for first time buyers!!!!! when the devil is in the details (4K a year limit, and can't be used on exchange of contracts) – Tim Sep 20 '17 at 12:31
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    OK, I've only just noticed that the last few paragraphs are a quote from MSE rather than advice aimed specifically at me, which does rather alter the balance of the answer. – walrus Sep 20 '17 at 12:36
  • Yeah, I think there is a better way to show quotes, which I don't know how to do, would have made it clearer that is was a quote then! – Tim Sep 20 '17 at 12:37
  • You can quote with the '>' character at the start of the line; I've edited your answer (and shortened the quote) but it won't be visible until it's been peer reviewed. – walrus Sep 20 '17 at 12:40

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