FTB - Equity Loan through work

stiltoncheese

Hello

I am a FTB with a few queries, and don't really know where to begin. This is probably a bit long winded, so I apologise in advance.

Basically, my job (local council) are offering a scheme of an equity loan of up to £45,000 (minimum lend £20,000) as an incentive for their employee's to get on the property ladder.

The loan is interest free, and there are no monthly re-payments. You only pay it back when you leave the company (you then have 2 years to re-pay) or if you sell the property and then they take a percentage of the sale.

The bit I don't understand is that they have inserted the following paragraph which i don't really get...

"Since this scheme is funded by your employer, you will be liable to pay tax on the loan as a taxable benefit"

It says to contact the employer to see how my taxable pay will be affected, but I wondered if anyone else has taken up a similar scheme where they know how this is affected (the person who deals with it at work is away for a couple of weeks).

Also, there is a bit that states that I will be expected to raise a mortgage of no more than 3 times joint salary and 3 1/2 times single salary. However, as the bank will only lend me a maximum of £85000, and I'm looking at a property of £128,000 (hoping to offer 118,000 and take it from there) my dad has agreed to act as guarantor so that I will be able to raise the additional money.

Will they take mine and dad's income as joint, or will they base it on my income alone (in which case i will be borrowing more than 3 1/2 times my salary)

Also, does this seem reasonable - if they accept an offer in the region of £120,000 then I will only need a mortgage of £100,000 provided I am offered at least 20,000 of the equity loan, which i assume would count as a deposit?

I am currently renting and my only outgoings apart from rent/bills is my car insurance and mobile phone. Unfortunately, I share a propery with a friend who has just bought somewhere with her boyf and I need to move on. Don't really want to rent anymore as I feel it is dead money.

If i get the propery I want then it has 2 bedrooms, so I will hopefully be able to take in a lodger for the second room to help towards the mortgage.

I appreciate that there are a few questions and this is probably a bit muddled, so please ask if you need any further info, my head is literally scrambling at the mo with everything I need to sort out!!

lynzpower

My freind has one of these, shes a london teacher mind. Im not sure about how it works with an LA, my LA doesnt do it AFAIK.

However, I dont know the ins and outs, it sounds much better than Shared ownership that I have. One thing I would say is that she did say it took ages to come through, so it worked that she applied, they gave her the money THEN she went viewing & offering, I suspect you are doing things the wrong way round.

stiltoncheese

Thanks for the reply Lynzpower

Basically, I found out on wednesday that my friend had an offer accepted on her property and that she would be moving out :eek:

Our contract here is not up until 8 december 06, but we paid a month's rent in advance, so could officially cancel all bills and move out on/around 8 november.

I have sent off for all the info and am waiting for a response, but thought I had better make a start at seeing what the banks would lend me and what sort of properties are available.

Thankfully, like I said, I basically have until the end of the year, so have loads of time for the equity people to accept or decline me, but am hoping that if i can find a property i like, then i can put in an offer stating that i am unable to complete until november (which is what my friend has just done).

To be honest, I am quite clueless about all this, so am just blobbing along, which is why my poor brain is a bit muddled!!

BobProperty

Hopefully I can answer the tax bit. Taxman takes an interest in any loan over £5000 you have from your employer and looks upon it as a benefit in kind if it isn't at a commercial rate. e.g. you are getting a 0% interest loan off your employer, because of your employment. The taxman will take a deduction for the benefit of not having to pay interest. I think it is worked out at some standard rate the taxman has in a book somewhere, but the bottom line is that you will probably have a bit shaved off you tax code to cover it. You payroll section should be used to doing it, anyway.
Start here assuming I've got the link right http://www.hmrc.gov.uk/employers/ebik/ebik3/beneficial-loans.htm

stiltoncheese

Thanks very much Bob, that was really helpful

I didn't realise how many things you had to think about when you want to buy for the first time!