HomeBuy Direct

xx_sair_xx

thanks for your quick reply, i think a joint application is the next step.

i'll keep you updated.

gemma7wayne

Hi you can do a joint application but you dont have to both be on the mortgage this is what we did (we got declined from bank tho).

But if you are not going on the mortgage your earnings cannot be included but that could be a good thing because if he earns 30 and you earn 17 you wouldnt be entitled to the full 30% if thats what your after.

You would be classed as living with him so they would still do some checks on you as an associate.

Ninnut85

Hey guys,

Me and my partner are also currently going through the HBD scheme.
Today I decided to look further into the "staircasing" where you can pay back the equity loan.
Has anyone else looked into this as I believe I have found the downside "catch" to the HBD scheme if my understanding of it is correct.

After 25 years you have to have paid back the percent loan you were first given, be it 30%, 20%, etc.
It looks like there are 2 ways of doing this, one way is to sell your home and give them their percent owed back to them via the sale of your home. Sounds good but if your house cost you £150,000 and has gone up to say £200,000 after 25 years then you will have to give them £60,000 upon the sale of your home. Now, no one knows exactly how the market will be in 25 years times but I’m guessing £140,000 won't get you much. This is what seems to be the first catch.
The second way to pay off the loan is via "Stair casing." Now this is where I may have the wrong end of the stick but this is how I understand it works.

Your first staircase payment has to be a minimum of 10% of the current value of your home. So if your home currently is worth £150,000 you have to find £15,000 from somewhere in order to pay back 10% of the equity share (this is on top of paying your mortgage as well). How is anybody using this scheme going to be able to find this kind of money on top of a mortgage?
If somehow you are able to find that kind of money you can then pay back in 5% chunks. So you would then need to pay back four more 5% chunks of your total homes value.
Your total loan would have been £45,000 at 30% on a £150,000 home.
Assuming you can find £15,000 you now owe £30,000 which is the remaining 20%.
Four 5% chunks of £150,000 is £7500 each finally bringing your total up to £30,000 and paying off your loan.
All this is assuming your house value stayed exactly the same (which is highly unlikely I know). So if we assume the house goes up in value all these numbers will be increased and the longer your take to pay back the loan the more your house will likely increase by and the more than % chunks are going to cost you.

I don't know about your guys but I’m now having serious doubts about this scheme.
How is anyone who is using this scheme because they don't have the means to save a deposit supposed to obtain 10% of their house value whilst paying a mortgage?!

Seems to be unless you are lucky enough to come into some money big time you are simply buying the house on the understanding you are going to have to sell it within 25 years in order to pay the loan off

Idiophreak

Ninnut85 wrote: »

How is anyone who is using this scheme because they don't have the means to save a deposit supposed to obtain 10% of their house value whilst paying a mortgage?!

Seems to be unless you are lucky enough to come into some money big time you are simply buying the house on the understanding you are going to have to sell it within 25 years in order to pay the loan off

It's not a secret that you have to repay the deposit at some point - in fact, it's kinda the whole point of the thing. If you enter into it knowing full well that you're never going to afford to repay the deposit, it's a bit of a waste of time - you just need to hope you can get enough equity in your house that *that* works as the deposit next time you want to move - which is how you, eventually, get your foot on the ladder.

These types of scheme are, however good for certain people.

I've just bought through an alternative shared equity scheme with very similar terms. There are two things you've failed to allow for in your summation:

1) the mortgage on the property is less than the rent would be - meaning that if we're to save a deposit, it's more likely on this scheme than it is in private rental. We're effectively £200/month better off...So instead of paying £900 rent, we pay £700 mortgage and save £200/month toward the deposit - in 10 years, this will give us 24k before interest - a good chunk of a deposit.

2) a lot of younger FTBs can be relatively assured that their wages will increase over time - people on structured wages, especially, but many young professionals can be confident their wages will increase - obviously, depending on the occupation, that may be a bit of a punt, but it may be a calculated risk people are prepared to take.

The two things combined mean these schemes *may* be a good way to get on the ladder - but it's not for everyone - and if your wages are so small you'll never get close to repaying the loan - and there's no prospect of this improving, it might not be for you.

Ninnut85

Thanks for the reply.
I was fully aware the money would have to be paid back in full I just wasn't aware it would be on such steep conditions, ie 10% chunks which I think quite a few people will struggle to pay back on top of a morgage.
Thanks for the tips

Ninnut85

Does anybody know if it's possible to remortgage to get the cash to pay of the equity loan in one lump sum or do you have to pay it off by this staircasing method?

Idiophreak

Ninnut85 wrote: »

Does anybody know if it's possible to remortgage to get the cash to pay of the equity loan in one lump sum or do you have to pay it off by this staircasing method?

Depends on what happens in the future, I guess - if house prices rise, your LTV will fall, so you'll have a shot at remortgaging to cover some, or all, of the deposit, but you can't really bank on that as the solution.

Ninnut85

Well then really the only people who can afford this scheme are those who's mortgages via this scheme are at least £200 a month cheaper than their current renting situation? That seriously has to limit drastically the amount of people who can take advantage of this scheme.
In my area no renting home is £200 more than an average first time buyers mortgage on this scheme, not by a long way.

I'd be surprised if 1% of first time buyers were able to take advantage of this scheme unless renting prices drastically out weigh mortgage prices in your area

Do you not think it likely house prices may go up at all within the next 25 years?

Idiophreak

Whether they'll go up that much, it's hard to say (also, on my scheme, I only have 10 years...)

A lot of the people these schemes are aimed at are those that *can* save a deposit, but are disinclined to..the idea is that they get the place now *then* can save, rather than having to save in rental, then buy...Just means that in the time you're saving your deposit, you're paying your own mortgage rather than someone elses.

As I said before, though, there is limited point to the thing if you really don't earn that much money.

These schemes are often (rightly or wrongly) not designed to help *everyone* buy a house. They're designed to help those that would buy a house anyway do it more easily. The average house price being as it is, at the moment, with a large rental market, it's just unlikely that *everyone* could afford to buy a house...just the way it is.

Ninnut85

So really these schemes aren't all that helpful as it looks to most people (i'm assuming) they are for people who can't afford to save a deposit when really they aren't even available to them.

Ok, thanks for all your help :T