Soldato
Help to buy equity loan
- Thread starter dalehitchy1
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Associate
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I'm not sure anyone mentioned delaying a purchase for the sake of a Lifetime Isa (LISA). A LISA can be cashed in with it's 25% bonus after 12 months, so it's only unsuitable for those who have a high probability of purchasing in <1 year. For anyone else, it could form one low-risk high-return aspect of a savings portfolio, whether you are saving for one year or ten years; 25% is 25% and that won't be beaten by any product with the same low level of risk as an ISA.
And there are some of us young'uns who are consciously saving for the big things later in life, even on lower levels of income!
Soldato
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
Difference is the building society have a fixed £ not a value linked %! Surely a standard 95% ltv must work out better?
If the lifetime ISA was available last year I would have done it. As I could have put more in than the help to buy. But I'm not going to get the max out the offer. I'll still get 1 year + of interest and 25% bonus.
I'm really frustrated that they came out with the £200 limit. My other savings are in bonds for now
I don't think it is necessarily a "complete no-brainer" because there are other factors that need some consideration, such as how good the mortgage deal is that you get in conjunction with it. Effectively you are restricting yourself to 75% LTV products whereas if you have a big deposit you may be better off just taking a standard mortgage. It also depends on what you expect to happen to the value of the property; if you think it will increase significantly then again borrowing from a traditional lender may help to avoid the 'equity bill'.
For people with small deposits I can definitely see the appeal, as it may let them buy a better class of property than they could otherwise afford (and thus the 'equity bill' is less of a problem, given they will have benefited from 80% of the value increase). But for those with large deposits I think they may be better off passing up the opportunity.
Associate
I considered HTB when we purchased 6 months ago, in the end it didn't seem worth it because of the potential equity bill. We had a 20% deposit so the relatively small improvement in interest rate going to 75% LTV did not seem to be worth the risk of the market rising and having to cover the equity bill in 5 years time.
That said I can see the appeal and sense in certain circumstances, depends how much financial risk you want to take, if youre unsure probably best to take some financial advice.
That said I can see the appeal and sense in certain circumstances, depends how much financial risk you want to take, if youre unsure probably best to take some financial advice.
Not really, from the same provider the difference is an extra £430 a month for a 95% LTV, over the 5 year period that's just over half the equity loan paid back if we save it instead.
Same here, could have maxed out the LISA over the year, I cashed mine in last year at £3600, so didn't miss out on much, so still came away with over £900 in bonus and interest for a years worth of saving.
Assume its still general consensus that help 2 buy is probably not the best option, I am still a little off target for my deposit and a buffer of savings, I have enough for a 10% deposit and a litle bit more, but its still not enough in terms of covering things like fees, furniture, and having a comfortable savings buffer. If I am going down the route of a normal repayment mortgage I am probably going to have to keep saving through until the last quarter of this year.
Or I could go for help 2 buy, but I dont really want to if I can help it.
Or I could go for help 2 buy, but I dont really want to if I can help it.
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We used help to buy as we had no deposit. Over 5 years later and we hqve had nothing to say we are being charged intrest or have to pay it back.
Caporegime
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We used help to buy as we had no deposit. Over 5 years later and we hqve had nothing to say we are being charged intrest or have to pay it back.
Help to buy (5% deposit) and help to buy equity loan (20% loan, interest free for 5 years) are different things.
It's worth taking IMO if you don't have a large deposit and thus can't get one of the better mortgage rates, and are wanting a new build. The potential 'risk' of a large equity bill people talk about I don't see as a risk at all; if you have a large equity bill that's surely a good thing because it means the value of your property has gone up and since you own 4x as much of it relative to the loan, your own equity stake will have increased in value by 4x as much as the loan amount.
e.g. buy a house for £200k, owe government £40k, net difference is £160k
After 5 years house worth £300k, owe government £60k, net difference £240k.
So the fact your equity bill has jumped by £20k should be no concern as the value of the property has gone up by £100k meaning you have realised an £80k gain.
I guess it does mean you probably wouldn't want to take a product with ERC that last longer than 5 years (e.g. a 10 year fix) because you may need the flexibility to remortgage after 5 years to pay off the loan.
e.g. buy a house for £200k, owe government £40k, net difference is £160k
After 5 years house worth £300k, owe government £60k, net difference £240k.
So the fact your equity bill has jumped by £20k should be no concern as the value of the property has gone up by £100k meaning you have realised an £80k gain.
I guess it does mean you probably wouldn't want to take a product with ERC that last longer than 5 years (e.g. a 10 year fix) because you may need the flexibility to remortgage after 5 years to pay off the loan.
Ah sorry I didn't know it was two different products, looks like I will go back and do some research, I think by the end of this year or the last quarter I should have enough and have a good buffer to afford a repayment mortgage deposit without all my savings going in one go.
I want to hold out for repayment if I can help it, but at the same time I do want to move out soon.
I want to hold out for repayment if I can help it, but at the same time I do want to move out soon.
more or less although there are some pre existing ones through the council.
https://www.helptobuy.gov.uk/shared-ownership/
as said due to paying back the value at the time of payment, and you can only pay back in 5% sums and the fees, it realy is poor value.
the 95% mortgages and the help to buy ISAs are the best ones.
Caporegime
I did this 2 years ago, my plan is to overpay as much as possible then remortgage to include the equity loan when the 5 years interest free is up.
The only downside to this scheme in my experience is when you come to remortgage after any initial fixed rate (mine was 2 years), the available financial product options are limited compared to someone who isn't on the scheme.
The only downside to this scheme in my experience is when you come to remortgage after any initial fixed rate (mine was 2 years), the available financial product options are limited compared to someone who isn't on the scheme.
