It rises with the RPI and is still much lower than the interest rate you would have to pay on a 95% mortgage (for example)
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Help to buy equity loan
- Thread starter dalehitchy1
- Start date
It rises with the RPI and is still much lower than the interest rate you would have to pay on a 95% mortgage (for example)
I know. Compound RPI+1 up and 1.75% becomes 3.5% and beyond in no time. This in an environment where interest rates are very low.
On top of that you still have to pay for any appreciation for the part you didn't buy.
On a 95% LTV mortgage your debt is fixed at least.
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I know, but you made it out to be shocking when you need to compare it to other options for new buyers with only a 5-10% deposit.
Yes it is rubbish compared to having a 50% deposit and being able to get the very best interest rates around, but when you compare it with paying 5% interest on the whole mortgage from the get go, on a 90-95% LTV mortgage, it has a lot of advantages - especially if you intend to move within or soon after the 5 years.
Soldato
Ok i got rid of my old help to buy type equity loan property 2 1/2 years ago.
It wasn't the government scheme but was similar in all respects, I bought a flat with one just before the crash. They owned 20% of my flat and i paid nothing on that for 8 or so years. It made my interest rates TONS better as people have said and as the flat was still under the new build price i paid for it when i sold it they took some of the hit. All good you would think.......
DO NOT USE IT ON ANYTHING LEASEHOLD.
The leasehold and loan management company bent me over bigtime getting out of the agreement. Partly because my "solicitor" was a muppet.
2 days before i completed the sale they refused to cash out and made me pay them an extra £5k knowing i would lose my new house and my buyer if i didn't cough up. The "solicitor" hadn't finished the paperwork when he should have.
I was in a position where i had to pay or lose everything i'd already laid out.
I did however take my solicitor to the ombudsman and get all my fees refunded in the end for that and a list of other mistakes they made, but i still lost that 5k.
Keep records of all communication with them and check everything, theses people are the pondscum of the legal profession, ask any real lawyer.
My advice would be do it and overpay your mortgage as much as you can as fast as you can.
Then in 5 years time you can get a mortgage extension to cover buy the additional 20% off them (the fees are pretty low on government scheme and most mortgage companies will pay the legal fees).
That way you get 5 years at at least 75% LTV (remember you have to put in 5% deposit) then your LTV will be better than 95% even if you have to pay more for the last 20% casue the house has gone up.
Its about managing LTV not the total amount paid.
If you house went up then the LTV gets even better cause you own the 80% so 80% of that increase is your equity. the other 20% gets put on your new mortgage.
Budget for the increase, plan for it and use that money to overpay until it arrives.
I would strongly recommend budgeting for any mortgage to jump up as I believe that as inflation rises thanks to brexit sooner or later interest rates will have to follow.
Its a matter of when not if, remember interest rates are at unprecedentedly low levels and have been now for a long time. That cant last forever.
It wasn't the government scheme but was similar in all respects, I bought a flat with one just before the crash. They owned 20% of my flat and i paid nothing on that for 8 or so years. It made my interest rates TONS better as people have said and as the flat was still under the new build price i paid for it when i sold it they took some of the hit. All good you would think.......
DO NOT USE IT ON ANYTHING LEASEHOLD.
The leasehold and loan management company bent me over bigtime getting out of the agreement. Partly because my "solicitor" was a muppet.
2 days before i completed the sale they refused to cash out and made me pay them an extra £5k knowing i would lose my new house and my buyer if i didn't cough up. The "solicitor" hadn't finished the paperwork when he should have.
I was in a position where i had to pay or lose everything i'd already laid out.
I did however take my solicitor to the ombudsman and get all my fees refunded in the end for that and a list of other mistakes they made, but i still lost that 5k.
Keep records of all communication with them and check everything, theses people are the pondscum of the legal profession, ask any real lawyer.
My advice would be do it and overpay your mortgage as much as you can as fast as you can.
Then in 5 years time you can get a mortgage extension to cover buy the additional 20% off them (the fees are pretty low on government scheme and most mortgage companies will pay the legal fees).
That way you get 5 years at at least 75% LTV (remember you have to put in 5% deposit) then your LTV will be better than 95% even if you have to pay more for the last 20% casue the house has gone up.
Its about managing LTV not the total amount paid.
If you house went up then the LTV gets even better cause you own the 80% so 80% of that increase is your equity. the other 20% gets put on your new mortgage.
Budget for the increase, plan for it and use that money to overpay until it arrives.
I would strongly recommend budgeting for any mortgage to jump up as I believe that as inflation rises thanks to brexit sooner or later interest rates will have to follow.
Its a matter of when not if, remember interest rates are at unprecedentedly low levels and have been now for a long time. That cant last forever.
Don
its also worth noting that they don't own 20% of your property, they have a 20% stake in the equity of the property.
There is a shared ownership scheme, but this is the shared equity scheme being bounded about.
There is a shared ownership scheme, but this is the shared equity scheme being bounded about.
We've done it on our house. We have a brand new 3 bed terrace and our monthly payments are only around £600 which is cheaper than most places are to rent. Our strategy is to overpay for the 5 years, then remortgage to buy back the 20% stake. In the long run who knows it may pay off it may not, we just wanted to move out ASAP and didn't want to rent.
Associate
I did this scheme in 2009 and it was great. I was paying them like £90pm until I bought them out in 2015 and just as I was in the process of buying them out they sent me a letter saying they had somehow broken the law in the original contract so they refunded me all of the money I'd paid them over the 7 years! 
So effectively I had an interest free loan from them for 7 years.
So effectively I had an interest free loan from them for 7 years.I did help to buy (10 year interest free) and recently had the house valued after owning for 3 years, hasn't gone up very much at all where I live. We are waiting a couple years to remortgage and claim the 15% back which in our case hasn't gone up too much. Probs 3 to £4k interest in the long run.
It is worth it in some instances but not others I guess.
It is worth it in some instances but not others I guess.
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I expect the value of my house to stay similar or drop slightly over the coming years as it's a new build, and I already believe it's at the top end of the spectrum for the area I'm in. 10% equity is easily achievable for me at the end of 5 years, if I'm really a tight ******* I could maybe manage the whole 20%.
We also used the Help to Buy ISA's to fund part of our completion deposit. Means we managed to get a much bigger house well above our current needs, in the hope of not needing to move for the next 30 years at least.
We also used the Help to Buy ISA's to fund part of our completion deposit. Means we managed to get a much bigger house well above our current needs, in the hope of not needing to move for the next 30 years at least.
Soldato
Willing to take such a poor deal as the the HTB equity loan rather than saving a little more and having complete ownership over the equity position, but spending ~£2k on a TV 
I'll never have complete ownership of the equity until I repay the building society so what difference does it make if someone else has a stake anyways. It's allowed me to get into a larger house, earlier than I could have otherwise got, on a 75% mortgage instead of a 95 or 90% mortgage. Plus I'm in a position of being easily able to save the difference and have at least half the equity loan paid off before the 5 years are up, and possibly having the full lot paid off.
And my TV was £1750
And my TV was £1750
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Caporegime
I did the original equity HTB in 2010 with my ex.
Got a £153k flat which sold for £300k 5 years later.
And even if we hadn't sold, the RPI-rise of the equity loan would take 7 more years after the original 5 year interest free period before it even matched the rate on our mortgage, so it was a total no-brainer.
Got a £153k flat which sold for £300k 5 years later.
And even if we hadn't sold, the RPI-rise of the equity loan would take 7 more years after the original 5 year interest free period before it even matched the rate on our mortgage, so it was a total no-brainer.
Associate
I am on my 2nd now, both been good experiences.
First one was on an apartment(I think I got it in 2013) which cost £150k, I could afford to put 10% down, but in the end I put the 5% in and bought a motorbike
.
110
So 7.5k in for me. and 30k for the Gov.
I sold it 2 years later for £171k + 2k cash for me to leave all my furniture.
Gov then took their £35k (Approx)
And I walked away with around £25k (From what i remember) after all expenses etc were paid.
I could then re-invest that into my next property (4 bed detached bought with partner). We have had it a year now, and are about to start making over payments, but we will just sell by the end of year 5, or remortgage.
I would definitely recommend this
First one was on an apartment(I think I got it in 2013) which cost £150k, I could afford to put 10% down, but in the end I put the 5% in and bought a motorbike
.110
So 7.5k in for me. and 30k for the Gov.
I sold it 2 years later for £171k + 2k cash for me to leave all my furniture.
Gov then took their £35k (Approx)
And I walked away with around £25k (From what i remember) after all expenses etc were paid.
I could then re-invest that into my next property (4 bed detached bought with partner). We have had it a year now, and are about to start making over payments, but we will just sell by the end of year 5, or remortgage.
I would definitely recommend this
Associate
- Joined
- 25 Sep 2016
- Posts
- 174
Just trying to understand - why does it matter if house prices rise? Government gives you £1000 for free for depositing £4000 each year. 25% interest - no brainer, surely?
Worth mentioning that you have to have had a Lifetime ISA open for at least 12 months before using it for a house deposit, whereas H2B ISA you can call upon when the balance surpasses £1600. So, if you were to buy this year, you wouldn't be able to use a Lifetime ISA for a house deposit, you would have to use it for retirement or close it down and sacrifice any benefits accrued thus far. Also, you can't use both a H2B ISA and a Lifetime ISA, the plan would be to transfer your H2B ISA into a Lifetime ISA come April, leaving you with one deposit-scheme product.
You can't open multiple Lifetime ISA's but you can have one of each type of ISA.
My personal example
Property: 2 bed 2 bath apartment
Location: Hertfordshire/Essex border
Property price at purchase: £340,000
Date keys exchanged: June 2015
Opening position
£17,000 equity (5% deposit)
£68,000 liability (HTB 20%)
£255,000 liability (mortgage (2 year fixed at 1.89%))
…………………………………………………………………………………
Personal wealth £17,000.00
…………………………………………………………………………………
Current position (January 2017)
Property valued at: £400,000
£17,000 equity (5% deposit)
£11,000 equity (mortgage capital paid)
£48,000 equity (80% of property increase)
£80,000 liability (HTB 20%)
£244,000 liability (mortgage)
……………………………………………………………………………….
Personal wealth £76,000.00
………………………………………………………………………………
‘Conservative’ anticipated/ theoretical position at end of year 5
Property value: £420,000
£17,000 equity (5% deposit)
£30,000 equity (mortgage capital paid)
£64,000 equity (80% of property increase)
£84,000 liability (HTB 20%)
£225,000 liability (mortgage)
……………………………………………………………………………….
Personal wealth £111,000.00
………………………………………………………………………………
The above is based on me selling the property and using the equity/capital/ wealth whatever you wish to call it, to upsize and also be free of HTB. This has always been my plan from the offset. So straight away its obvious that as long as you are happy to sell at year 5 (and property hasn’t crashed), the HTB loan is a complete no brainer. On top of this I save £1,000 per month to go towards paying off the HTB which is £60,000 added equity at year 5 (£171,000 total).
Now let’s look at this the other way. I decide not to take the HTB loan and decide to save 10% deposit (an extra £17,000 on top of what I had) before buying the property. On the proviso I saved £1,000 a month on top of paying my rent, this would take me 17 months. This for arguments sake is the same duration give or take that I’ve currently been owning my property (June 15 to Jan 17). As per the above real life example, my property is now worth £60,000 more in those 17 months which means I won’t achieve saving 10% in 17 months. This increase in the property price of £60,000 means I now need £6,000 more which will take another 6 months, bringing us to a total of 23 months saving before getting on the ladder. Of course in these 6 months the property would increase further and so rinse and repeat this depressing situation.
Once we have achieved the above slog to get 10% of a never ending moving target, we now are eligible to get a 90% LTV mortgage with a rubbish interest rate.
Property: 2 bed 2 bath apartment
Location: Hertfordshire/Essex border
Property price at purchase: £340,000
Date keys exchanged: June 2015
Opening position
£17,000 equity (5% deposit)
£68,000 liability (HTB 20%)
£255,000 liability (mortgage (2 year fixed at 1.89%))
…………………………………………………………………………………
Personal wealth £17,000.00
…………………………………………………………………………………
Current position (January 2017)
Property valued at: £400,000
£17,000 equity (5% deposit)
£11,000 equity (mortgage capital paid)
£48,000 equity (80% of property increase)
£80,000 liability (HTB 20%)
£244,000 liability (mortgage)
……………………………………………………………………………….
Personal wealth £76,000.00
………………………………………………………………………………
‘Conservative’ anticipated/ theoretical position at end of year 5
Property value: £420,000
£17,000 equity (5% deposit)
£30,000 equity (mortgage capital paid)
£64,000 equity (80% of property increase)
£84,000 liability (HTB 20%)
£225,000 liability (mortgage)
……………………………………………………………………………….
Personal wealth £111,000.00
………………………………………………………………………………
The above is based on me selling the property and using the equity/capital/ wealth whatever you wish to call it, to upsize and also be free of HTB. This has always been my plan from the offset. So straight away its obvious that as long as you are happy to sell at year 5 (and property hasn’t crashed), the HTB loan is a complete no brainer. On top of this I save £1,000 per month to go towards paying off the HTB which is £60,000 added equity at year 5 (£171,000 total).
Now let’s look at this the other way. I decide not to take the HTB loan and decide to save 10% deposit (an extra £17,000 on top of what I had) before buying the property. On the proviso I saved £1,000 a month on top of paying my rent, this would take me 17 months. This for arguments sake is the same duration give or take that I’ve currently been owning my property (June 15 to Jan 17). As per the above real life example, my property is now worth £60,000 more in those 17 months which means I won’t achieve saving 10% in 17 months. This increase in the property price of £60,000 means I now need £6,000 more which will take another 6 months, bringing us to a total of 23 months saving before getting on the ladder. Of course in these 6 months the property would increase further and so rinse and repeat this depressing situation.
Once we have achieved the above slog to get 10% of a never ending moving target, we now are eligible to get a 90% LTV mortgage with a rubbish interest rate.
I have done it. Pretty straight forward. Can pay it back in one or two lumps over the 5 years.
After 5 years you pay a 'fee' for the loan, so it's not tied to interest rates or anything. You will keep paying this fee until you pay off the loan.
Or just do what I did, re-mortgage the house folding in the 20%. Do it sooner rather than later as the loan is calculated based on current house prices at paying it off.
Easy.
After 5 years you pay a 'fee' for the loan, so it's not tied to interest rates or anything. You will keep paying this fee until you pay off the loan.
Or just do what I did, re-mortgage the house folding in the 20%. Do it sooner rather than later as the loan is calculated based on current house prices at paying it off.
Easy.
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Associate
Yes you can't have multiple Lifetime ISA's but you can have mutiple cash or stocks ISA's with different providers in a given tax year so long as you don't deposit more than the annual limit.
It depends if you are delaying a purchase to get the extra. It depends really what age you are at.
If you are 20 and saving for 10 years, then by all means go ahead (I don't think people look that far forward, especially when you aren't earning as much when you are younger).
However, if you are 30 then you probably wouldn't want to be waiting till 40 to buy a house (worse would be delaying a purchase to get the bonus). But that same 30 year old has plenty of time until retirement to take advantage of a Lifetime ISA.