Homebuy = Ripoff

[Hank_Marvin]

Where do you live to need a 20-30k deposit.

Homebuy is a pretty good scheme and not that expensive. Several mates have done it and I've looked into it. Just means you have to buy a new house, which sucks.

Aye, where do you live to need that kind of deposit.

Me and gf looked at some part buy houses but I didn't like that most were leasehold rather then freehold, not a big issue but just didn't sit right with me, plus the houses are brand new and that means the smallest gardens they can get away with.

We got a 90% (10% deposit) mortgage (nationwide) on a £134k 2 bedroom house.

 

[krooton]

But the point here is that the combined is more than renting would be and stop thinking that renting is dead money as its not - remember when you buy a house the costs of owning the house will always be more than renting - you have to pay for everything from maintenance to breakdowns.

Homebuy is worse than either option, after 5 years you will not have 36k of investment, you will have covered the interest on the mortgage and then own a tiny % of the house - the equity you own will not be 36k worth.

If you want to buy out the % from government/HA you have to pay for a valuation (every time you want to buy some equity) You then buy a % of the revaluation of the house - lets say you have 50/50 on 150k - you are paying for 75k equity but the 75k is going up in value (the house market is rising) so lets be conservative, in your 5 years prices have gone up 10% so you are now buying a % of £82250

Lets say you saved up 10k in 5 years to buy some equity, you're 10k buys you 2.5k in equity

Homebuy is a government funded scam.

My numbers were plucked, but all it would take is some maths to work out if shared-ownership is beneficial or not. It won't always be a waste of a money, and it won't always be worth it.

Now whilst we are on Homebuy Direct, not shared ownership, here is why we are much better off:

We were initially renting a room in a decent 3 bed flat. Room rent was £530.

A 1 bed flat in the area we have bought to a similar spec to our's is £950 pcm to rent.

Our mortgage is £580 pcm, 33% of which covers interest. As it is a brand new build, there is a 10 year NHBC warranty for anything building related, and the developer guarantees all supplied goods, including flooring, with 3 year warranties.

We don't pay any interest on the HomeBuy loan until after 5 years, and by then we will have sold up.

 

[Ukadder]

We are going to need 18-20K for a 10% deposit where I live if we want a 2bed house, Homebuy scheme would suit us perfectly as we should then be able to get something that we want, rather than possibly getting something for £160,000 which would be at best a 2bed flat.

 

[Shimmyhill]

Our mortgage is £580 pcm, 33% of which covers interest. As it is a brand new build, there is a 10 year NHBC warranty for anything building related, and the developer guarantees all supplied goods, including flooring, with 3 year warranties.

We don't pay any interest on the HomeBuy loan until after 5 years, and by then we will have sold up.

Its still the same point tho, when you sell you pay the homebuy loan off first - fair enough no interest but remember the 30% you have to pay back is 30% of the current value NOT 30% of the price you paid - it will wipe out any equity you may have had from paying the other mortgage on the 70% and you are back to square one with no house, no deposit and potentially negative equity.

 

[Glaucus]

well the idea is you start paying the 30% loan of, and you would still have equity for the 70% part and what ever you have paid of from the 30% loan.

if houses prices drop you don't pay all or any of the loan, depending how much it drops so that is not a bad thing that it is calculated on market value.

 

[krooton]

Its still the same point tho, when you sell you pay the homebuy loan off first - fair enough no interest but remember the 30% you have to pay back is 30% of the current value NOT 30% of the price you paid - it will wipe out any equity you may have had from paying the other mortgage on the 70% and you are back to square one with no house, no deposit and potentially negative equity.

Hey?

The 30% doesn't infringe on my equity at all.

Whichever way the value of the property goes, when we sell up, 30% of the sale value goes to the government/developer, and 70% goes to us. As our mortgage is only for that 70%, how can the other 30% affect us?

 

[Pudney]

We are going to need 18-20K for a 10% deposit where I live if we want a 2bed house, Homebuy scheme would suit us perfectly as we should then be able to get something that we want, rather than possibly getting something for £160,000 which would be at best a 2bed flat.

If it makes you feel any better I'm from the exact same area in the same situation. House prices around here are extortionate and as a first time getting the deposit required is difficult to say the least, sort of makes homebuy about the only option.

 

[Pudney]

Its still the same point tho, when you sell you pay the homebuy loan off first - fair enough no interest but remember the 30% you have to pay back is 30% of the current value NOT 30% of the price you paid - it will wipe out any equity you may have had from paying the other mortgage on the 70% and you are back to square one with no house, no deposit and potentially negative equity.

You don't sell 70% of the house you sell 100%...

 

[[TW]Fox]

Rent over, oh and Fox, stay out of my thread

Wow, weird.

Strange thing is that this thread isn't one I'm fussed about and wouldnt even have clicked the 'reply' button had it not been for me reading that strange sentance and then thinking 'Who on earth is he anyway' after I'd read it. But anyway, well done, I'm here now thanks to you!

Have you considered the notion that home ownership isn't a right and nobody owes you the ability to have a home? If you can't afford to buy a house, well, thats a shame, there are lots of people who cannot afford to buy a £150,000 appreciating asset, it's not the end of the world.

Rent instead, or get a better job if you wish to buy really expensive things.

And next time don't post weird sentances and I won't be attracted to your thread

 

[Shimmyhill]

Hey?

The 30% doesn't infringe on my equity at all.

Whichever way the value of the property goes, when we sell up, 30% of the sale value goes to the government/developer, and 70% goes to us. As our mortgage is only for that 70%, how can the other 30% affect us?

You don't sell 70% of the house you sell 100%...

Right, its not tricky - you are saying the 30% loan is free as you are moving and paying it off.

Lets assume you paid 100k - 70/30

Time to move, you pay for the valuation and it comes back at 115k.

You pay back the 30% = £34500
You have 70% = £80500

I cant work out the interest amounts out but the 'free' loan has cost you £4500 and you will walk away with very little money when you pay back the mortgage on the 70%

Depending on buy out fees etc you could end up paying to sell the house and be no further into your next house purchase.

TL;DR - Its a mugs way to buy a house is the basic gist.

 

[Glaucus]

except it;s not designed to be a short term money making enterprise.

It is meant to give you the means to buy a home, not make money. that is something it does very well.

Still gives you 10500 of which probably absolute max 6k fees (3k per mortgage for fees/solicitors) so still gives you a profit and that does not include any loan or mortgage you have paid of.

And if the market slumps, you win.
pay 70%
Market crashes by 30%, you sell and pay back nothing of the 30% loan and it is written off.

which would you rather have a fixed loan, or loan with a safeguard.

 

[Pudney]

I cant work out the interest amounts out but the 'free' loan has cost you £4500 and you will walk away with very little money when you pay back the mortgage on the 70%

No.

No, it really hasn't.

Can I point you in the direction of GCSE maths and the art of percentages?

You pay £70k. You sell the house for £115k. 30% goes to the HA. That leaves you with £80,500. That gives you an extra £10,500 plus any equity taken off from your mortgage repayments. Voila, it's not cost you money.

 

[Glaucus]

Wizzykid, have you looked in here.
http://www.homebuy.co.uk/

Sometimes there are resale houses, which can be much better value.

 

[regulus]

Have you considered the notion that home ownership isn't a right and nobody owes you the ability to have a home? If you can't afford to buy a house, well, thats a shame, there are lots of people who cannot afford to buy a £150,000 appreciating asset, it's not the end of the world.

Rent instead, or get a better job if you wish to buy really expensive things.

And next time don't post weird sentances and I won't be attracted to your thread

I wanted to say something similar but thought it wasn't worth the argument. It aint a right to own a property, nor does the government or any scheme owes you the right of it being easy to acquire a place.

It's uncanny how my situation was the same as the OP until I stopped making lame excuses or cry on forums or anywhere where people don't give a crap at the end of the day. I took all responsibility upon myself. I blamed nobody but myself.

I got a second job, I became utterly obsessed about budgeting and saving where I could. For 5 years all I did was buy specials or Buy One Get One Free's. I stole toilet paper at work and used it at home so I didn't have to spend the money to buy. I have moved to the smallest and cheapest place I could find and slummed it there for years. I went from having nothing to owning my own property with NO mortgage in 6 years. We're already working on new houses, or investments rather, but that's another story. I've just turned 30.

OP, this is what you do. Sit down with a pen and paper, write down your incomings and outgoings. Take the variable costs (phone, food, entertainment) and chop the amount in half. Make it work, I don't care how, nor should you, just make it work. If you have a car and the shops are close, walk there, I still do it to this day and I have a car and 4k a month disposable income. I walk 3 miles to Tesco and back to save on fuel.

Get a cheaper phone contract (I pay £5 a month for my own personal mobile), cheaper ISP (£12 here), forego any gym contracts and start hitting the road for fitness (if you train that is), cancel your Sky (mainly crap anyway) , spend 3 hours in Tesco/ASDA/Waitrose/Wherever and fish out all the bargains. Plan your meals, battle like hell with insurance companies for better deals, same with holiday packages. Get exited about saving money. Make sure you have a savings account, write down the amount in it and plastered it all around your room/house. If you see it around you enough, and see the numbers go up weekly/monthly, it starts getting exiting.

Alternatively, ignore all I said and keep crying on forums to faceless screen names who would've forgotten about your plight roughly 9 seconds after posting a barely throughout reply.

 

[Shimmyhill]

except it;s not designed to be a short term money making enterprise.

It is meant to give you the means to buy a home, not make money. that is something it does very well.

Still gives you 10500 of which probably absolute max 6k fees (3k per mortgage for fees/solicitors) so still gives you a profit and that does not include any loan or mortgage you have paid of.

And if the market slumps, you win.
pay 70%
Market crashes by 30%, you sell and pay back nothing of the 30% loan and it is written off.

which would you rather have a fixed loan, or loan with a safeguard.

If the market crashes - that is the only way you can 'win'

No.

No, it really hasn't.

Can I point you in the direction of GCSE maths and the art of percentages?

You pay £70k. You sell the house for £115k. 30% goes to the HA. That leaves you with £80,500. That gives you an extra £10,500 plus any equity taken off from your mortgage repayments. Voila, it's not cost you money.

Lets not get silly with insults about maths, you will end up looking worse. You have given the government £4500 end of. You dont seem to understand how a mortgage works, the interest is calculated on the mortgage term not the amount you have paid off - the first couple of years into a mortgage you are paying off the interest, you only start owning a small amount of the house when you have paid down the interest.

The buy out fee from mortgage can be several thousand pounds, you will not be walking away with 10k.

And of course lets say this is an way to own your house - when you pay off that 30% again its 30% of the current value, again every time you want to pay off some you have to pay for a valuation.

Say you have a 5k sum to pay off, lets use the same figures - the 30% is now £34500 so you pay the fee (not sure but i remember its in the hundreds, lets be generous and say £100) hand over your 5k and you have now paid off ...... £400

Remember that is everytime you want to pay off some of the 30%.

Of course if the house prices go down you could win, that is very unlikley to happen - prices are on the up again even during a recession.

 

[Glaucus]

Lets not get silly with insults about maths, you will end up looking worse. You have given the government £4500 end of. .

And comapred to adding that 30% on to a mortgage or personal loan, it is a bargain.

You don;t seem to understand, this is not money making scheme. It is a way of buying a home. At a very good rate, compared to the private sector.

You can only pay it of in 10% chunks, so you can't pay £500 of. You save up and pay it of in chunks and you have 10 years interest free and a further 10 years at around 1.7%. Far far better than any money loan in private sector.

Of course if the house prices go down you could win, that is very unlikley to happen - prices are on the up again even during a recession.

We aren't in a recession.

Your arguments make no sense at all.

 

[Shimmyhill]

And comapred to adding that 30% on to a mortgage or personal loan, it is a bargain.

You don;t seem to understand, this is not money making scheme. It is a way of buying a home. At a very good rate, compared to the private sector.

Again you dont understand basic maths.

The cheapest way to borrow large amounts of money is on a mortgage. I will make it easy.

If you borrow that 30% at 4% or 6% the only way that scheme is cheaper is if you can pay it all off with a housing market that has not risen past 4 or 6%.

Lets assume this mortgage is for 25 years, check how much your house sold for 25 years ago, work it out in 'todays money' im going to place a bet that it has risen more than 6% ...

Homebuy schemes are the most expensive way you can buy a house, hence my major issue with them being backed by the government for people who cant afford to buy a house

 

[Shimmyhill]

You can only pay it of in 10% chunks, so you can't pay £500 of. You save up and pay it of in chunks and you have 10 years interest free and a further 10 years at around 1.7%. Far far better than any money loan in private sector.

You dont understand how it works.

You have to have the house revalued to make a payment - there is a fee.

You are then paying off at 30% of the new value of the house, not what you paid for it - the current value of the house you have paid a fee to find out.

10% of 30k = £3000 (the price you borrowed at)
10% of 34k = £3400 (the adjusted 10% with market value having gone up)

It has cost you £400 more to pay the 10% off + the valuation fee + the interest amount if you're in that period.

We aren't in a recession.

Your arguments make no sense at all.

We are the first quarter out of it, my house has gone up in value in the 2 years i have owned it - mostly during a recession - as you point out we are not in a recession, guess what house prices are going up ....

 

[Glaucus]

If you borrow that 30% at 4% or 6% the only way that scheme is cheaper is if you can pay it all off with a housing market that has not risen past 4 or 6%.

Not at all. You forget about interest rates for savings.

and you can't even get 100% mortgages any more.

A 30k mortgage for 10 years will cost you 3.5-5k and that's calculating as if that is 90% of the house value and over 10 years. In reality any funding you could get for that 30k, is going to be significantly higher. As you are talking about personal loans and other such things.

 

[Shimmyhill]

Not at all. You forget about interest rates for savings.

and you can't even get 100% mortgages any more.

Exactly, its cheaper to save money for a deposit than be in a homebuy scheme ...

Ohh and 3k is naff all in interest at moment, about £7 a month on my Maxed ISA and thats on the assumption you have the 3k all the time, you dont as you're saving it.

It's pointless arguing as you dont seem to understand how finance works but the only way homebuy is cheaper is if house prices fall the whole time you pay back the entire loan.

If they go up during the period you lose.