FirstBuy Scheme//First Time Buying!

BilboBagins_2

Hi guys..i wanted a little advice on this topic.

First ill give you some background info;
Me and my partner are looking to buy our first house, we've managed to save up 15k deposit.
With a combined earnings of 41k the bank will only lend us 113k, which works out to £600 amonth (Easily paid back as we can afford a £800 renting accommodation).
With FirstBuy there allowing people to borrow more but obviously with high loan & mortgage rates.

What concerns me is in the small print it states, The equity loan is 0% interest for 5 years, then 1.7% and 1% every year after.
So now does that mean 20 years time that equity loan is going to turn round and bite you in the !!!?
Unless ive taken it the wrong way in 20 years that loan will be at around 15.7%?!


Any advice on first time buying or this scheme is much apprecaited.

Thanks!

brit1234

You will start see these schemes in the news next year for the wrong reasons. It's called the shared equity time bomb when buyers suddenly have to start paying the loan and mortgage, stuck in negative equity and facing higher mortgage rates.

Avoid at all costs.

JPB123

I think you've misunderstood. The equity share is interest free for the 1st 5 years. In Year 6, you pay 1.75% of the share. Each susequent year (up to the maximum period of 25 years), the interest rate rises by RPI + 1%.

Eg: £100k PP = £20k equity share.

Year 6 - £20k x 1.75% = £29.17 pcm

Year 7+ £29.17 x 4.90% (based on current RPI + 1%) = £1.43 rise

I am a Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

BilboBagins_2

Thanks for replies.
Jpb So how much will you be paying back then in 20 years?

JPB123

Depends on what happens with the RPI rate as to what the interest rate will be.

WRT the capital, you pay back 20% of the valution at the point of redemption. If prices have risen, they get a share of the capital appreciation; if dropped, then they get 20% of that lower figure