85/15% scheme for new builds

kiki*_2

Hi we are first time buyers looking at properties but we only have 5% deposit. Builders want us to use 85:15 scheme but we can't find much info about it and are a bit wary. Is this better than a 95% mortgage?
Please help

opinions4u

Save for longer. Get to 10% deposit.

Don't buy any house with a special scheme on equity.

leveller2911

Agree with Opinions4u but would also add have at least 6-8 months payments tucked away for a rainy day.....

comedy_dave

Hi All,
Whilst I understand that you are trying to help, just flatly advising someone against a scheme of any kind without advising the pitfalls seems rude.

My other half and I have just bought a house on Barratt's 85/15 scheme (we move in June), and at the moment it seems an affordable way for first time buyers to get onto the ladder. Essentially a front loaded deposit.
We understand that we will have to be disciplined, we have worked out that to pay off the second charge loan inside 10 years we need to put away £220 a month, plus we will most likely inherit a lump sum in that timeframe.
The nature of the loan means we repay at the property value at the time we come to repay, if we get to the 10th year and the property has rocketed in value, then we are quids in anyway, if it has dropped, we have some money left over.

The obvious pitfalls I can see are:-
ill-discipline leading to not having the lump sum.
Large property value spikes, leading you to need to sell up or remortgage should you wish to move.
Large external cost, leading to you eating into your repayment pot.

I'm happy with the deal we have got, and understand it is a long term investment. As it will be our family home for years to come.

I would say go for it, but make sure you can make both the Mortgage repayments, plus your second charge loan repayments, and then some. Plus take out Mortgage, Life, and Lifestyle cover. That way should you get ill or lose your job, you won't lose your house aswell.

TrickyDicky101

Schemes such as this can impact on your ability to sell the property should the need arise - for example if property values have fallen substantially and the developer does not want to crystallise their loss they could refuse you permission to sell. Whether they are able to do so should be detailed in the scheme's T&Cs so it is always worthwhile checking these carefully (and preferably get your solicitor to do it).

maninthestreet

If you haven't got at least a 10% deposit, you can't afford to buy.

opinions4u

comedy_dave wrote: »

Hi All,
Whilst I understand that you are trying to help, just flatly advising someone against a scheme of any kind without advising the pitfalls seems rude.

So sorry. I was pushed for time, as I am now.

But I do invite the OP to come back and ask "why?".

Then they'll get responses from others who have struggled to succeed with such schemes (and I do acknowledge that there are several that are inferior).

Anything that tries to buck the market invariably ends up a crock.

GGB

maninthestreet wrote: »

If you haven't got at least a 10% deposit, you can't afford to buy.

Technically if you have anything less than 100% 'deposit' you can't afford to buy.

In an ideal world yes people would have 15/20/25% deposits or more for house purchases. Sometimes however life brings about challenges or opportunities that make this impossible/unrealistic.

If a buyer is comfortable with (a) the terms of the deal, (b) the amounts needed to repay any incentive and (c) the mortgage costs, then if they have the means to get on the sceheme they can afford to take on the mortgage to buy the house

brit1234

House prices are falling on all indexes this month, and this week been predicted for 5 years.

You need a bigger deposit or you are straight into negative equity with higher costs and potentially trapped in this home even if your circumstances change.

Whilst saving you can enjoy the price falls, its a double winner. Avoid these scam schemes at all cost.

opinions4u

GGB wrote: »

Technically if you have anything less than 100% 'deposit' you can't afford to buy.

In an ideal world yes people would have 15/20/25% deposits or more for house purchases. Sometimes however life brings about challenges or opportunities that make this impossible/unrealistic.

If a buyer is comfortable with (a) the terms of the deal, (b) the amounts needed to repay any incentive and (c) the mortgage costs, then if they have the means to get on the sceheme they can afford to take on the mortgage to buy the house

I think you missed out (d) and (e).

(d) The greater risk of property value falling with a new build property.
(e) The greater risk of propery value falling where any element of shared ownership, shared appreciation, vendor gifted deposit, builder funded deposit etc exists.

wymondham

As above comments really. I appreciate people buy on them and are obviously happy to do so since buying at this time is important to them personally. I'd ask a question:

If house prices are reasonably priced now, then why do these schemes exist at all? Are they introduced by the kind house builder/Government who see's your pain and wants to help you, or do you think they may be a way to shift stock which is overpriced (hence the scheme actually props up these prices!)

It's a very personal decision to buy on a scheme and there is no right or wrong with it - it's only you if effects. One thing for sure though is it 'complicates' things if/when you decide to sell since you have another party you have to comply with, and you can be sure they will always want as much from the deal as possible - always read the small print!

Good luck.