Home Buy Direct Scheme

simonuk82

Hi everyone,

I am new so please be gentle and I am sorry if this has been covered before.

I would like some opinions on the following: I am considering buying a new build home. In order to purchase it, I will need assistance form the goverments home buy direct scheme. Is it worth it?

The House was originally priced at £119,175 for a two bedroom. The current asking price is now £105,000. In order to qualify for the home buy direct scheme, I would have to be able to gain a mortgage between 70 & 80% of the value. This means I have a limit on the amout I can drop the asking price. If my offer ment I could raise 81% value on the mortgage, I wouldn't qualify. My lowest offer would have to be approximately £97,000

So I guess I am asking if this seams reasonable? More information if it helps, I earn £18596, I don't have any debts, currenlt living with family, my outgoing are for my car and gym totaling £65 per month. I have £5,000 in savings. I am 26

Thanks for any opinions.

RichOneday_2

I'm not sure why you can't drop your offer.

Whatever the price you agree a deal at you then have to raise a mortgage of between 70-80% of that amount. As always, the lower the purchase price the better.

Why would you then try to get an 81% mortgage knowing the rules of the scheme?

simonuk82

Thanks for replying,

I am not trying to get an 81% mortgage, I am tring to stay within the limits of the scheme 70 - 80%. Which mean (I think ha) If I go too low for the asking price I won't qualify for the scheme.

Cannon_Fodder

What mortgage amount can you obtain?

4x salary is £74,284. being 80% of £92,980...if you can get offered 4x salary.

Current asking price £105,000. So 80% would need an £84,000 mortgage. Which would need a £21k salary for 4x...

You will need some of the £5,000 savings for fees, moving costs, and the rest to fallback on as you adjust to life paying a mortgage, i.e. around £547 a month at 6%. What rates are you being offered?

Please do not forget that your outgoings will increase to include;

Buildings insurance
Contents insurance
Gas and/or Electricity
Water
Council Tax
Telephone and Broadband
Food ?
TV License

superfran_uk

I really don't think that as a single person on less than 20grand that being able to get too much of a mortgage will be an issue. My advice is to negotiate the price down as low as you possibly can!

simonuk82

I spoke to an independent mortgage advice company on the phone, they said I could acuire a mortgage of £74,384 Goverment Scheme offering £30,616. Thats for the current value of £105,000. It was fixed for 2yrs at 4.79% £354 per month. After 5yrs paying the goverment £45per month. The mortgage is based of 38yrs. I have estimated approximately £850 - 900 for all bills ect... after tax I get £1209 per month.

Thanks again for everyones help so far, it a scary time for me. I am new to all of this.

Cannon_Fodder

26 + 38 = 64.

I personally do not think it is a good idea to put yourself in hock right up to retirement.

And this on what today is a pretty cheap house. When you decide you need a family home, to be nearer better schools, or whatever other factors influence you, there will be no wiggle room in your term, it will have to be an increase in monthly amount - which could already have grown to painful levels due to higher IRs...

And funding the other 30% at some stage, on top...?

2 years is a bad period to fix for, imo. Not long enough for you to get several pay rises under your belt, but plenty of time for interest rates to have gone up substantially.

When I started my mortgage in my mid-twenties, I deliberately went for a 25 year term, knowing that at 50 I would have the next 10+ years to convert the old mortgage payment into savings instead, for a comfortable retirement - or to enjoy my Fifties...

If the house is "the one" to you, knock them down as hard on price as you can, and with the corresponding reduction in mortgage amount, shorten the term as much as you can afford. Get a flexible mortgage that allows payment holidays, in case of job loss/financial problems, and overpaying for when times are good.

(I cannot believe that after the Credit Crunch there are still 38 year mortgages out there. It seems the Lenders have learnt nothing.)

superfran_uk

I would NEVER opt for such a long term, you will have to live there forever to have any kind of equity! What happens if your situation changes?

Think seriously if this is something you really want to do, and see if you could afford a 25 year term - if you really can't afford it, maybe you are not ready to step on to the property ladder.

Also, if you cannot afford the difference between a 25 and 38 year mortgage (which is under £100 a month based on the figures you gave above) a two year fix is lunacy. If interest rates rise (which they will! they can't go down!!) you'll be paying a LOT more than £100 extra a month!

simonuk82

You have all given me great stuff to think about and change.

I enquired and decided for a long period (if I went ahead with that), because I thought I could shorted in when its up for renewal, and when I get pay rises ect.. But thought initially I would keep the payment down untill I ajust with all the out goings.

I didn't relise the difference between a long term and 25yr would only be £100 extra per month, this is something I will enquire about if I go ahead. I will also ask for a longer fixed period and more flexibility.

missaitch

You say you've spoken to a IFA. Explain to them you're worried about the affordability, or if your builder is paying for the IFA (as in my case) tell them your worried and may have to pull out. Then go through the figures, say you want 25years and work out how much you can afford each month. The IFA will be able to tell you clearly what is available and whether it's possible, make your own budget (use MSE budget planner) and make sure they don't stretch you too far.

Your IFA can then contact the builder and I bet they reduce price to fit you. I have just done all the above and got a further £15,000 off the price. They'll be more bothered about getting the sale.

Let us know how you got on...

pizzagirl

simonuk82 wrote: »

I spoke to an independent mortgage advice company on the phone, they said I could acuire a mortgage of £74,384 Goverment Scheme offering £30,616. Thats for the current value of £105,000. It was fixed for 2yrs at 4.79% £354 per month. After 5yrs paying the goverment £45per month. The mortgage is based of 38yrs. .

38 years is madness. You obviously cannot afford this property.