Homebuy Direct

beario79

Hi there,

After renting for years, my partner and I now have enough to pay for a small deposit and legal fees etc (£12,000) and we have come across a 3 bed new build Persimmon property in a brilliant location through the Homebuy Direct scheme. The deposit required is around £7,000.

We have been told that we will own the house 100% and that the Government and the Homebuy provider will pay for 30% of the house. Whatever we sell it for they will take 30% of the sale price back, unless we have 'staircased' and bought back the loan during the life of the mortgage. We won't have to pay interest on the loan for 5 years and then it should be 1.75%.

I am not very knowledgeable when it comes to mortgages and will be speaking to an independent financial advisor. I would also appreciate some less formal feedback from this forum, on the general opinion of this kind of deal.

Many thanks!

mpquikster

I'm sure there are many people out there who take full advantage of this scheme but whenever I've looked into the full costs of it I've always been put off. I guess you just have to be sensible and make sure you budget for the extra money you will need to find after year 5 when you start repaying the govt.

evoke

There's only ever one winner in schemes like these and it's not you. Notice that they'll take 30% of the sell price back when you sell it. I'm willing to bet that there's a clause that you can't sell it unless the 30% that they will take back at least covers the original 30% amount. You'll be left with 70%. Will that be enough to pay off your mortgage?

beario79

Hi Evoke, I see what you are saying, which is why I will be talking to IFAs. My partner and I also hope to 'staircase' so that when we do eventually sell the percentage will be less. I suppose I see it that the 30% is just part of the mortgage that we haven't paid off yet, but given to us interest free for a period. Thanks.

brit1234

The scheme was designed to get extra money out of the buyer and prop unsustainable housing bubble.

Personally I would save a little more, enjoy the price falls and get a normal home thus avoiding the choking debt of the rip off home buy scheme.

Government funding for these schemes is ending which make up about 43% of sales now. With the end to funding and continual price falls you will be left in massive negative equity.

Save and enjoy the price falls, no need to rush into things.

WalksWithEyesOpen

I'm in a similiar position, normally I would avoid these things like the plague, however the prospects of a new baby in the house forces things, currently the house we live in although nice in the summer isn't particularly great in the winter, moving means paying more rent (about £100 more than what we are paying now).

Looking at the math we should be saving £200 a month if we moved into the new house (between rent, morgage and council tax).

We are looking to buy 25% of the house (leaving 75% of the risk of negative equity to someone else).

Which means roughly if house prices drop by 20% over 2 years we will be out by £6k, however since we will save £4.8k over that same period we will in effect have a new house for losing only £1.2k.

Does this seem like resonable decision making?

beario79

I can't say with any authority - but it does seem like a good saving each month! Perhaps you should also speak to an independent financial advisor?

Eric1

beario79 wrote: »

..we have come across a 3 bed new build Persimmon property in a brilliant location through the Homebuy Direct scheme..

Too good to be true? Brilliant locations shouldn't need a scheme to sell.
I'd do a bit more research.

thriftychap_2

ill cut and paste a response i wrote earlier.....

Please don’t be put off key worker/first time buyer schemes by the few narrow minded individuals here, they are very polemic in their arguments.

I am a teacher and was a FTB; i chose to do a scheme with the coop that i am extremely happy with. It means i can afford my own place with plenty left over at the end of the month.

Where these schemes will fail is down to individuals own inclination or lack of to be careful with money and plan for the future. If i was to spend all my disposable income each month on a new car, eating out and clothes etc and then in 25 years or whatever term the loan is on, have to then take out a mortgage to buy the remaining % of my property i would agree the it’s not a good situation to be in. However the scheme has not failed, i would have failed.

If however I decide to use my disposable income to a) make substantial overpayments on my 62K mortgage to reduce the term from 25 years to 7 (this is an aim) or b) save our 1300 pounds each month to eventually buy the remaining 40% in 4/6 years time (c) pay as much of the 40% 2nd charge back as i can in two years then remortgage and rent the flat with a LTV ratio of 70% which will earn us money each month and move to a 3 bed home and start a family with a flat that is paying for itself and making us money.

Any of the above is possible if you are astute, the schemes in question can be either a blessing or a burden, and it depends on what you make of your individual circumstances.

I wish you all the luck with your pursuit of your own home. I am very pleased with the scheme i am on and the service from the coop bank has been and continues to be exceptional.

Oh, just a quick note, i did originally buy the flat on my own. My OH is moving in Feb when she qualifies as a nurse, hence the reason our savings capacity will be 1k - 1.5k per month. I have also received 2 promotions in the last 1.5 years so my earnings have gone up as well. I mention this as I’m sure somebody will pick up on the fact these schemes are meant for people who can’t afford a house on the open market, which now we clearly can but could not 1.5 years ago.

Best of luck.