Help to buy...

mrbios

mrbios

mrbios

Soldato
Joined
7 Jun 2003
Posts
16,201
Location
Gloucestershire
What's the general opinion of this scheme? To be avoided or a good idea for those of us who can't afford a full deposit?

I've been renting for the past 5 years, but i also own a flat I've had for 6 and a half years now which I think i can now sell for a tiny profit (enough to get me a deposit big enough that i could finally get a house if i use the help to buy scheme) it's going to be a big decision to decide to sell it and wear the costs of renting + mortgage once tenant moves out for however long it takes to sell, so i need to be sure that I'm not going to chuck myself into another dark pit of despair if i do go for it.

Obviously the more you borrow/smaller the deposit the more your monthly payments are going to be....but do you pay significantly more on help to buy than if you had the equivalent mortgage amount without help to buy?

Any helpful links for information anyone can point me too beyond the obvious google results?
 
ci_newman said:
What equity do you have in the flat?
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About 6-7k plus 5k in savings. This is part of the reason I'm thinking of selling the flat and starting again from a first time buyer standing, I'm losing money every month on the flat, so if that isn't enough to buy then at least with the flat sold i could start saving quicker.

As for location, see location to the left :)
 
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Not sure on the exact letter of the law, but technically you are not a first time buyer.

There are 2 help-to-buy schemes, one is an equity loan from the government for 20% of the value of the home. The other is simply a mortgage guarantee so you can get a 95% mortgage. The latter is terrible.

You can only get the equity loan on new builds too, so it limits what you can actually buy.
 
This help to buy scheme fills me with dread. Its theoretically allowing people to buy £600k homes and not start repaying the government loaned deposit for 5 years.

As an extreme example:

£600k home at 4% is just over £3k a month mortgage repayment, assuming you had 10% deposit of £60k.
(I'm unsure if the HTB is for homes upto £600k including deposit - anyway)

Use HTB to get an extra 10% deposit means you owe £60 after 5 years. Interest added at 1.75% per year of the loan with a minimum 10% payment of the property value.

Disaster waiting to happen
 
Django x2 said:
This help to buy scheme fills me with dread. Its theoretically allowing people to buy £600k homes and not start repaying the government loaned deposit for 5 years.

As an extreme example:

£600k home at 4% is just over £3k a month mortgage repayment, assuming you had 10% deposit of £60k.
(I'm unsure if the HTB is for homes upto £600k including deposit - anyway)

Use HTB to get an extra 10% deposit means you owe £60 after 5 years. Interest added at 1.75% per year of the loan with a minimum 10% payment of the property value.

Disaster waiting to happen
Click to expand...

That's the sort of info i was after, the government spout all the good stuff and try to hide all the negatives. It's those negatives i need pointing out before i even consider it.
 
Django x2 said:
This help to buy scheme fills me with dread. Its theoretically allowing people to buy £600k homes and not start repaying the government loaned deposit for 5 years.

As an extreme example:

£600k home at 4% is just over £3k a month mortgage repayment, assuming you had 10% deposit of £60k.
(I'm unsure if the HTB is for homes upto £600k including deposit - anyway)

Use HTB to get an extra 10% deposit means you owe £60 after 5 years. Interest added at 1.75% per year of the loan with a minimum 10% payment of the property value.

Disaster waiting to happen
Click to expand...

Not really. 1.75 interest is lower than any mortgage interest rate you are likely to get. Also it means your mortgage will only be a 75% one which will command a better rate of interest and your monthly mortgage payments will be less than if you just took out a regular 90\95% mortgage.

As long as you do the sums and are sensible and start saving towards paying off the equity loan in good time, it is going to work out cheaper than a 95% mortgage.
 
If you can pay the Goverment back while the interest is lower than the mortgage, then its win win.

I cannot remember how much it goes up and how often.

But if you work out the mortgage price, plus divide the goverment loan by 5 years of monthly payments and if you can afford both go for it.


Oh and you are not a first time buyer (Even if you did sell the flat).
 
You only have to pay the government back under the original scheme. The new scheme is just a normal mortgage that the government acts as 15% guarantor of.
 
Seems to be a lot of conflicting information, seems there's some confusion over the old scheme and the new scheme and what rules apply to which.
 
It isn't hard. There are just two different schemes running currently - the help to buy equity loan and the help to buy mortgage gaurantee.
 
Jono8 said:
It isn't hard. There are just two different schemes running currently - the help to buy equity loan and the help to buy mortgage gaurantee.
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It's all very well pointing out what's available and saying it's not very hard, but that's not the information I'm after. I know what the scheme is and its intentions. What I'm after is the fine print, the things that people don't find out until it's too late, which is what people have started pointing out but the problem is that there's conflicting information being given.
 
Django x2 said:
Interest added at 1.75% per year of the loan
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Incorrect. From year 6 you get charged 1.75% of the equity loan.
Each year, that increases by the Retail Price Index + 1%, but not additively.

So if Year 7 saw RPI at 2%, the interest on the loan would increase by 3%, so 1.75% becomes 1.8% (not 4.75% like so many people think).
 
krooton said:
Incorrect. From year 6 you get charged 1.75% of the equity loan.
Each year, that increases by the Retail Price Index + 1%, but not additively.

So if Year 7 saw RPI at 2%, the interest on the loan would increase by 3%, so 1.75% becomes 1.8% (not 4.75% like so many people think).
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Do you have this written down somewhere? I've yet to find anything that supports this. It seems as though no companies are willing to disclose what you will actually pay come year 5.

I think the main concern is paying back the 20%
 
rossk26 said:
Do you have this written down somewhere? I've yet to find anything that supports this. It seems as though no companies are willing to disclose what you will actually pay come year 5.

I think the main concern is paying back the 20%
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Krooton is correct.

Also the 20% never has to be repaid in theory. Just the charge to service the debt on a yearly basis.

If the house is sold, 20% (in this example) of the current house value is paid back to the government agency (Firstbuy/Newbuy or whatever they are called).
 
rossk26 said:
Do you have this written down somewhere? I've yet to find anything that supports this. It seems as though no companies are willing to disclose what you will actually pay come year 5.
Click to expand...

I'll need to dig around, but given I have been on the scheme for 4 years, I did loads of research :p

The equity loan is essentially a low interest loan that just increases with inflation to stay relative. Even if inflation was 5% year on year, it would take 18 years to hit the same interest rate as our actual mortgage.
 
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