Sunday, 21 August 2016

Help to Buy ISA

The scandal is reported in The Telegraph.

Now, I can understand why the government don't pay the bonus until completion - else people could cash the ISA and get the bonus as part of buying and then back out and keep the bonus. Makes sense!

What makes no sense to me is why, even with that caveat, that cannot work. The whole process of buying a house means various fees, and a deposit, and then a mortgage that gets actually paid on completion. I can understand the deposit being handed over on exchange, else you could find people don't have it on completion. But why can one not "hand over the ISA" at exchange too. Some legally binding commitment that on completion the ISA is cashed and used as a whole, with the bonus, at completion. After all the mortgage itself is like that, not actually paid until completion but all part of a legally binding process set up at exchange.

I am shocked it is not simply a signature on a suitable contact at exchange that gives the solicitor the ability to cash the ISA with the bonus at completion to make up with the mortgage the purchase price.

This cannot be beyond the wit of the legal profession, surely?

15 comments:

  1. Now you just have to find a member of the legal profession willing to change all of their templates to offer this 'specialised' service for less than the bonus amount of the ISA. Not to mention the government have already u-turned on the messaging that it's to save for a deposit. Are they allowed to do a double u-turn?

    What I want to know is whether there's a leg to stand on regarding false advertising, as both HSBC and Halifax pitch these products as saving for a deposit. If that's why you took out the product and it turns out you can't use it for that, have we been misled by the banks? Could be PPI all over again!

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    1. FFS the PPI calls may finally be dying out and we get a new thing for the scammers to call about - arrrg!

      I would say, looking at the adverts quoted in that article, that I'd expect the bank in question to cover the loan of the bonus from deposit to completion at no interest and cost as the very least they can do to compensate for false advertising.

      The problem is that this is all people without the resources to make that fight against the bank, and the last thing we need is the scum of the earth offering to help sort it out.

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  2. I claimed the HtB ISA bonus last month and my solicitor just put it towards their fees. Though looking at the updated FAQs on the HtB ISA website, they shouldn't have even done that...

    It is true though that there was no option to use the bonus for the deposit - both the lender and and the solicitor wanted proof that we had the deposit in place before they would move towards exchange.

    Wasn't particularly a problem for me as obviously the account hasn't been open that long, but once people start getting towards the full £3000 that could be a decent chunk of what people were hoping to use as a deposit.

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  3. An ISA is a personal allowance and cannot be assigned to someone else.

    It's the banks rather than the lawyers that need to sort this out, but you can see why they'd rather not.

    If a purchase exchanges but doesn't complete and the bank had already fronted the £3k, then the deposit including the bank's £3k would be lost.

    The bank would be left with an unsecured claim against the erstwhile buyer, who presumably wouldn't have needed to rely on the bank fronting the £3k if they had the means to do so themselves.



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    1. The deposit is the extra bit the bank are not having to lend. If the mortgage does not complete there is no need for the deposit so even if they covered £3k of that on the basis that they get to cases the ISA, if you don't complete they don't need the ISA to make up the deposit. The only bit that needs to be covered is fees that may be payable still if the sale does not complete.

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    2. As for not assignable - you don't need to assign it as such, you just need a binding agreement that on completion the solicitor, acting on your behalf, can cash the ISA, and then use that to settle the balance of your debt to the seller (i.e. part of the deposit) with the proceeds.

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    3. If the sale doesn't complete, there is every need for the deposit - that's the whole point of it! If the sale falls through after exchange, the seller is entitled to keep the deposit as a) a disincentive to pull out of the sale, and b) to make sure they're not out of pocket. So if the deposit does not exist until the sale completes (because you're relying on the bonus), then you've not actually provided the full deposit, so you're in breach of the contract.

      This is separate from the "deposit" on the mortgage (more accurately, the bit that the bank isn't funding). You can have a mortgage with a 40% "deposit", but the deposit you actually pay to the seller on exchange is 10%.

      Note this is all England and Wales only - the system is entirely different in Scotland, a distinction normally missed in reporting of property news...

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    4. Ok hang on there are two different things here then - a deposit the seller can keep, and the deposit for the mortgage (i.e. the amount they do not lend you).

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    5. The Telegraph has an interest in being scandalised at anything that might stop pushing house prices up, but I wonder whether this may be simply a matter of the ISA being usable for the mortgage deposit, the big lump sump that people were complaining about, but not for the house purchase deposit?

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  4. When we bought a house recently, the contract mentioned a 10% deposit but we did not actually pay it. The contract simply gave the seller the right to sue us for the amount of the deposit had the sale fallen through. Seems much more sensible to me and neatly bypasses the problem with Help to Buy ISAs.

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    1. > Seems much more sensible to me

      As a buyer, I'm sure it did!

      As a seller, it is a rather less attractive proposition than having the money and just being able to hold on to it...

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  5. Myself and my partner both had one of these ISAs when we bought our house (completed May 31st).

    The fact is, that when buying a house you have so many other expenses (Solicitors, Surveyors, removals, disbursements, Stamp Duty, etc) that it really doesn't matter.

    Yes, we had to hand over our full 5% deposit at exchange, but then on completion when the solicitor sent us our final bill they had received the H2B ISA bonus, and so we had £1,100 less to pay.

    On the other hand though, had we been given the bonus for exchange, we'd have no way of running off with the money - had we pulled out the seller would have gotten it not us!!

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    1. You're not thinking evil enough - I agree to buy my mum's house. She gets the bonus at exchange time. We then pull out. She gifts me the deposit she received at exchange. Hey presto, bonus handed to me :)

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    2. Now knock out the solicitors fees for both parties, and everything else you'd have to get through to get to the point of exchange... how much profit is really left?!

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    3. You can do conveyancing yourself - it's possible to get as far as completion without paying for anything other than a Land Registry certified copy of the title deeds. As you don't intend to actually go through with the purchase, the searches etc don't have to take place.

      Even if I used a solicitor (to give it a veneer of respectability), I'd be looking at about £250 to just get the certified copy, draw up the standard sale contract, and handle the money side (as that's the fraction of the quote I've got for conveyancing that covers the minimum work needed to do the exchange). You say you got £1,100 in bonus, so I'm looking at over £800 in ill-gotten gains by doing it fraudulently, even assuming I pay a solicitor.

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