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  • FIRST POST
    • Bigrachel
    • By Bigrachel 14th Mar 17, 2:05 PM
    • 31Posts
    • 12Thanks
    Bigrachel
    Is help to buy actually worth it?
    • #1
    • 14th Mar 17, 2:05 PM
    Is help to buy actually worth it? 14th Mar 17 at 2:05 PM
    I was looking at a help to buy mortgage and after consulting with a mortgage adviser I have realised it's actually going to cost me more than it would without the help to buy.

    Does anyone have any experience of help to buy scheme actually working?
Page 1
    • kingstreet
    • By kingstreet 14th Mar 17, 2:11 PM
    • 31,109 Posts
    • 16,592 Thanks
    kingstreet
    • #2
    • 14th Mar 17, 2:11 PM
    • #2
    • 14th Mar 17, 2:11 PM
    Without

    Can buy second-hand
    Struggle to get big enough deposit for a newbuild
    Higher mortgage rates

    With

    Newbuild only
    Lower personal deposit for a newbuild
    Lower mortgage rate
    Increasing payments to make if not repaid by year six
    More to pay back if property value increases
    Less to pay back if property value falls.

    You need to have an exit strategy based on different assumptions, such as property values rise/fall etc and should use some of the money you save from having a lower rate to build up a fund to help clear the equity loan sooner rather than later.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • ReadingTim
    • By ReadingTim 14th Mar 17, 2:20 PM
    • 1,369 Posts
    • 1,922 Thanks
    ReadingTim
    • #3
    • 14th Mar 17, 2:20 PM
    • #3
    • 14th Mar 17, 2:20 PM
    I was looking at a help to buy mortgage and after consulting with a mortgage adviser I have realised it's actually going to cost me more than it would without the help to buy.

    Does anyone have any experience of help to buy scheme actually working?
    Originally posted by Bigrachel
    I used to work for a housebuilding and contruction company. It seemed to be working for them very nicely. They paid my salary every month, so it worked for me as well. They also paid a healthy dividend, so it worked pretty well for the company's shareholders too. However, I didn't use help to buy, and not many of our shareholders did either. Make of that what you will....
    • clint_S
    • By clint_S 14th Mar 17, 4:48 PM
    • 348 Posts
    • 536 Thanks
    clint_S
    • #4
    • 14th Mar 17, 4:48 PM
    • #4
    • 14th Mar 17, 4:48 PM
    Help to buy is very good if you can afford to pay it back. It's ££K at around 0% for 5 years, meaning your deposit money can be invested gaining you money. If you stretch and buy the maximum you could afford and are stuck paying the interest payments after year 5 and only pay it back after 25 years when your house would have risen then it's an terrible.


    It is designed as a trap for people who look at what they can get and not at what they can afford. If your sensible it's a great idea and really worth it, if you're not then it's a financial trap.
    • marksmith125
    • By marksmith125 14th Mar 17, 5:29 PM
    • 17 Posts
    • 5 Thanks
    marksmith125
    • #5
    • 14th Mar 17, 5:29 PM
    • #5
    • 14th Mar 17, 5:29 PM
    Thanks Clint, Really worth and valuable information.
    • sultanabran
    • By sultanabran 14th Mar 17, 5:59 PM
    • 98 Posts
    • 35 Thanks
    sultanabran
    • #6
    • 14th Mar 17, 5:59 PM
    • #6
    • 14th Mar 17, 5:59 PM
    Help to buy is very good if you can afford to pay it back. It's ££K at around 0% for 5 years, meaning your deposit money can be invested gaining you money. If you stretch and buy the maximum you could afford and are stuck paying the interest payments after year 5 and only pay it back after 25 years when your house would have risen then it's an terrible.


    It is designed as a trap for people who look at what they can get and not at what they can afford. If your sensible it's a great idea and really worth it, if you're not then it's a financial trap.
    Originally posted by clint_S
    It's even better in Scotland where you don't pay interest on it, even after the 5 years.
    Last edited by sultanabran; 15-03-2017 at 8:25 AM. Reason: Typo
    • dannyjebb
    • By dannyjebb 14th Mar 17, 10:54 PM
    • 345 Posts
    • 81 Thanks
    dannyjebb
    • #7
    • 14th Mar 17, 10:54 PM
    • #7
    • 14th Mar 17, 10:54 PM
    The way I see it, you get 20% of your mortgage interest free for 5 years, after that you pay 1.75% as opposed to 2.35% which is the best rate we can get on a mortgage, in the area we are in house prices haven't rose much for the past 6 years or so, when you come to repay you pay 20% of the current value which is fair enough as technicially the govt owns 20% of the house. The real question should be how did a situation ever arise where the average joe spends the majority of their working life to pay for a place to live in!!!!
    • Windofchange
    • By Windofchange 14th Mar 17, 11:42 PM
    • 328 Posts
    • 423 Thanks
    Windofchange
    • #8
    • 14th Mar 17, 11:42 PM
    • #8
    • 14th Mar 17, 11:42 PM
    I think that outside of London and the S.E then it is perhaps worth looking at. Inside the M25 and down the S.E Kent towns along with pockets of the country, don't touch it. I have friends who have been helped to buy 500k + flats on earnings of around 35k p.a. They are realistically never going to pay it all back without winning the lottery, mum and dad leaving them a big inheritance etc etc.

    At the moment it is all lovey and wonderful - two bed flat, all the mod cons etc etc, but I think they are screwed either way. If prices go up forever more then owning the flat becomes further out of reach. If prices crash then they are stuck with a depreciating asset that I can't see people queuing up to buy. Who wants to buy a quarter of a flat in a falling market...

    Think the answer is going to depend on where, and can you realistically pay the money back. As mentioned above, don't look at what you could have stretching yourself today, look at what you can realistically afford given your current situation.
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    • Petite Anglaise
    • By Petite Anglaise 15th Mar 17, 5:34 PM
    • 45 Posts
    • 16 Thanks
    Petite Anglaise
    • #9
    • 15th Mar 17, 5:34 PM
    • #9
    • 15th Mar 17, 5:34 PM
    I have wondered about HTB for almost a year now- we are in London so it is 40% that we could borrow as a government loan.

    In the end we decided not to go for it, mainly because it felt like a time bomb.

    The positive aspect was the idea of purchasing a new build property with all the mod cons etc but the final prices released by the developers were eye-watering!

    In excess of 500k for a 2 bed flat and just a few pounds under the limit of 600k for the 3 bed flats.

    I just wondered what happens in 5 years when many owners perhaps might choose to sell up rather than start paying back the government loan. If there is flood of similar properties to the market that will surely affect the prices and also, what scheme will be in place to allow other FTBs to buy flats in excess of 500k?!

    Too many variables for my liking and buying on the open market seems a better option financially.

    One thing as well is that these HTB developments are not necessarily in the exact areas where you want to be living and you are often going to be living in a development with 500 plus apartments...not sure if I want to go back to living a student halls like environment, despite the very nice finishes on the properties.
    • alex_163163
    • By alex_163163 15th Mar 17, 8:26 PM
    • 93 Posts
    • 58 Thanks
    alex_163163
    I guess I feel that HTB has worked for me.
    I live in a town in the midlands and purchased my new build flat 2.5 years ago for £75k asking price.
    I had a larger than 5% deposit (14% to be exact) but couldn't borrow enough on my £16kpa salary at the time to get a mortgage for the rest.
    So I took out a 20% HTB equity loan, meaning my mortgage was for £50k, monthly repayments £197.
    2.5 years later, I have met my boyfriend and we have decided to buy a house together.
    Fortunately the flat has increased in value by £40k, so although I have to pay off more for the 20% HTB loan, I have still ended up with a lot more equity than I started with and can now move up the property ladder to a 3 bed detached house.
    My flat is being bought by another FTB.
    So in all I feel the HTB loan helped me at exactly the right time, and buying my flat with HTB was probably the best decision I've made.
    • Windofchange
    • By Windofchange 15th Mar 17, 10:01 PM
    • 328 Posts
    • 423 Thanks
    Windofchange
    I guess I feel that HTB has worked for me.
    I live in a town in the midlands and purchased my new build flat 2.5 years ago for £75k asking price.
    I had a larger than 5% deposit (14% to be exact) but couldn't borrow enough on my £16kpa salary at the time to get a mortgage for the rest.
    So I took out a 20% HTB equity loan, meaning my mortgage was for £50k, monthly repayments £197.
    2.5 years later, I have met my boyfriend and we have decided to buy a house together.
    Fortunately the flat has increased in value by £40k, so although I have to pay off more for the 20% HTB loan, I have still ended up with a lot more equity than I started with and can now move up the property ladder to a 3 bed detached house.
    My flat is being bought by another FTB.
    So in all I feel the HTB loan helped me at exactly the right time, and buying my flat with HTB was probably the best decision I've made.
    Originally posted by alex_163163
    I think this is the difference Alex. Away from the madness in London / SE then I think you can make a case for HTB working. As you have highlighted, the repayments for you are miniscule. Had you not been moving, you could realistically have hoped to pay off the borrowed amount in full anyway in 25 years.

    Where I think people need their heads examining is down South. I think that help to buy and other associated schemes are the next endowment mortgage type scandal waiting to hit not too far down the line. How many people are going to have paid off a 40% loan from the government before it starts charging interest? 5-600k in London, so that's what, 250k or so. I reckon you can count on the fingers of one hand the people who have access to that sort of money in HTB - if daddy is a millionaire you already have help to buy!

    There is already a glut of these new builds coming online, and yes, I think in a few years time there is going to be a glut of people wanting to sell up. If a recession / crash comes these things are going to sink quicker than the titanic. Who wants to buy a quarter of a depreciating 500k London flat!?
    Debt Free by Xmas 2017
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    • Petite Anglaise
    • By Petite Anglaise 24th Mar 17, 5:11 PM
    • 45 Posts
    • 16 Thanks
    Petite Anglaise
    There is already a glut of these new builds coming online, and yes, I think in a few years time there is going to be a glut of people wanting to sell up. If a recession / crash comes these things are going to sink quicker than the titanic. Who wants to buy a quarter of a depreciating 500k London flat!?
    Originally posted by Windofchange
    Windofchange

    I absolutely agree with you on the above!
    • cashbackproblems
    • By cashbackproblems 24th Mar 17, 5:37 PM
    • 1,564 Posts
    • 589 Thanks
    cashbackproblems
    its a con, is paying 100k+ more worth all the "mod cons" i.e. cheap ikea tat, as opposed to buying an older property and owning 100%? As mentioned above HTB in London is a joke 600k for a 2 bed badly new build, you will never get rid of it in the next 5-10 years.
    • moneysaver12
    • By moneysaver12 24th Mar 17, 6:28 PM
    • 2,000 Posts
    • 3,210 Thanks
    moneysaver12
    We looked at help to buy for a new build. The house we looked at would have been about 70000 more than the house we ended up buying. Plus we would have needed to pay for carpets etc. All our deposit thst we had would have gone. Then we would have to pay back the mortgage and the money we lent.

    In the end we bought a 17 year old house. Similar size to the new build but 70000 cheaper
    Married 09/09/09
    • dhokes
    • By dhokes 24th Mar 17, 10:06 PM
    • 59 Posts
    • 5 Thanks
    dhokes
    Who wants to buy a quarter of a depreciating 500k London flat!?
    Originally posted by Windofchange
    On paper, me. I'd buy things when they're falling in price and sell things when they're rising in price.

    That said, a house purchase is generally more than just a financial decision as emotions are involved.
    • getmore4less
    • By getmore4less 25th Mar 17, 7:47 AM
    • 27,978 Posts
    • 16,769 Thanks
    getmore4less
    its a numbers game and exit strategy.

    A tiny bit of HPI can kill it unless your exit strategy is to sell up.

    Your savings are the interest free loan and a lower rate on the rest.

    if you work on say 2% on 20% and 0.5% on 80% that's and average saving of around 0.8%

    that means 0.8% HPI and you end up owing more than you save.
    (adjusted for investment performance or extra savings on overpaying)

    once interest kicks in eventually it costs more than the cost of borrowing.


    The other factor is this is an equity based loan and like many other schemes YOU pay 100% of the maintenance/improvement costs and any fees associated with paying the debt off.

    You then have to factor in new build premium and resale potential.

    if the plan is to move on in by y5/6/7 then the HTB may be a good option if it gets you going at the cost of giving up some HPI.

    if looking longer term be aware that HPI could become very costly to buy out and taking a hit on higher costs up front could save a bunch longer term.
    • Petite Anglaise
    • By Petite Anglaise 25th Mar 17, 9:04 AM
    • 45 Posts
    • 16 Thanks
    Petite Anglaise
    The worry for me would be if the exit strategy is purely to sell up.

    Yes, there is the view that London is a "safe bet" etc, but where there is a development of 500+ units, my worry is that there will be a glut of properties on the market in 5 or 6 years time, with owners possibly desperate to sell.

    From one of the threads above, I think HTB certainly works in other parts of the country i.e. non-London or SE
    Asking prices of 75k for a new build flat is a complete world away from £500,000 + for 2 and 3 bed flats.

    It's such a shame, from our FTB point of view- HTB London seemed to hold a bit of promise last year, but I'm very glad that we haven't gone down that route.

    But who knows? Maybe in 5 years time the asking price on 2 bed flats in SE London will be something like £700,000 or more?!
    Just wonder how FTBs will be able to pay for this?
    • robatwork
    • By robatwork 25th Mar 17, 9:09 AM
    • 3,616 Posts
    • 3,933 Thanks
    robatwork
    As a general principle, whenever you buy something that you can't afford outright, you are going to pay more than if you buy it outright.

    Whether a TV on finance, car on HP, anything on credit card, sofa on "pay nothing now".... so a house on HTB or mortgage come to that, is no different.
    • GwylimT
    • By GwylimT 25th Mar 17, 9:16 AM
    • 5,597 Posts
    • 10,441 Thanks
    GwylimT
    My son and his partner used help to buy, they had a decent deposit that they put into (at the time) high interest accounts, at the end of the interest free period the HTB loan was paid off in full and they had the interest for investing the money. It didn't work out that much better than using the money as a deposit, I think they made about £1000 per year in interest, they used the interest towards their mortgage over payment.
    • JP1978
    • By JP1978 25th Mar 17, 9:19 AM
    • 208 Posts
    • 169 Thanks
    JP1978
    We looked at HTB on new builds (Scotland) that were circa £200k (4 bed detached, nice area) but as we would have so much in equity from our sale (40k) we were not eligible unless we bought a more expensive house so the percentages fell in line with what was allowed.

    So, it did us a favour really, we moved onto looking at slightly cheaper older houses on an adjacent estate and ended up buying a 10 yr old home that is far superior in build quality and finish than the new builds!

    Beleive in Scotland the HTB loan is interest free through its full term?
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