Telegraph Money has received scores of emails from young buyers left scrambling for money by the shock exemption.
Home buyers can use a 25pc Government bonus worth up to £3,000 to add to their deposit to buy a property. But this bonus can only be used on purchases worth up to £250,000, or £450,000 in London.
Many first-time-buyers joining shared ownership schemes thought they would be able to use their Isa bonuses as their shares were worth less than this threshold.
But many have been shocked to find – often at the very last minute – that the Help to Buy Isa bonus threshold is for the entire value of the property, and not just their smaller share, a rule revealed by The Telegraph last week.
The Government is refusing to clarify the wording on its website, which experts say is causing confusion.
In some places it refers to a limit on the “cost” of a property – a term which could be misleading as it can mean the amount the buyer pays for the property.
Other parts of the guidance refer to the “consideration” paid by a buyer, which can be interpreted to mean the smaller share bought in a shared ownership scheme.
In the case of shared ownership, the “value” of a property is significantly higher than the “cost” of the buyer’s share of that property, because buyers pay for a portion – typically around 50pc.
Earlier this week, a study by online estate agentfound that average properties in 46pc of English local authorities will be too expensive to use the Help to Buy Isa by March next year.
Junior lawyer Kamil Price-Latorre, 26, and his girlfriend Laura Gardiner, 24, an actress, found out just three days before they were due to complete their purchase of a one-bedroom flat in Hackney that they would not qualify for the bonus.
Even though their 35pc share of the flat was worth just £159,250, the fact that the total purchase price of the flat was £455,000 meant they were over the crucial threshold by just £5,000.
This lost them £1,400 that was meant to go towards their deposit.
Mr Price-Latorre said: “We’ve been doing frantic calculations to make sure we’ll still be in the black. We’ll probably still be OK, just about, but we won’t be able to buy any furniture for a while.”
Many first-time buyers are being forced to take out emergency loans from friends and family or use overdrafts to make up the shortfalls.
Accountant Melissa Rawlings, 24, and her partner Dave Thompson, 28, a doctor, will use an arranged overdraft to make up the £1,400 they were expecting to get from the Isa.
The couple is buying 45pc of a £600,000 two-bed flat in Holloway, north London.
She said: “We were pretty upset. We knew that we only had just enough money so when we didn’t get the Isa we knew it was going to be really tough.
“We can’t afford to buy furniture so we’re just going to buy a mattress and save up for everything else.”
Both couples say their solicitors did not realise that the entire property value was taken into account, and in many cases they went through the whole process of applying for the bonus, only realising that there was a problem when they were turned down.
The Government’s Help to Buy website still contains no specific information about shared ownership schemes, and neither does the longer “scheme rules” document.
Last month The Telegraph also revealed that the Isa bonuses cannot be used towards the initial deposit handed over upon exchange, which is normally worth around 10pc of the purchase price.
Instead the bonuses can only be received on completion, leaving many first-time-buyers who were relying on the extra cash short of money.
Another first-time buyer, James Thomas, 33, will have to borrow the missing amount, which comes to £1,250, from one of his friends to enable him to complete on his flat in Hackney.
He said: “We set up the accounts at the end of last year in good faith that we’d be able to use them.
“Not being able to use this for the initial deposit was annoying but not the end of the world. Not being able to use it at all was a slap in the face.”
A spokesman for the Treasury said: “The Help to Buy Isa scheme has paid out more than 30,000 bonuses to help people buying their first home.
“The property cost is capped at £250,000 across the UK and £450,000 in London to most effectively target first-time buyers.
“Help to Buy Isa savers can also use a shared ownership scheme if the market value of the property is under this cap, just like any other property purchase.”
- House price today: Pick your desired location for an average house price, or you can enter any value you please up to £999,999.
- Desired deposit: What percentage of the house price you want or need to save – remember this can be as little as 5pc with Help to Buy.
- Annual savings: The average you think you can save per year – if you’re not saving much but will be, then put an overall expected average.
- Total start amount: How much money you have already got saved.
- Total assistance available: How much you will be given towards a house by family or other sources. Don’t include Help to Buy here; to factor that in, drop the deposit amount instead.
- Annual house price inflation: How much house prices will go up per year. The Office for Budget Responsibility average for the next five years is around 5pc, which is the default here, but change it as you please.
- Attitude to risk: This is how willing you are to take risk with your money through investing. The low figure would be if you were sticking to Isas and savings accounts with little to no investment. Medium would involve investing in some stocks, funds or other risk taking options, but steering clear of anything too risky. High would involve taking a significant amount of risk with your money, but with greater potential returns.