FirstBuy scheme questions

K2t

Hello,
Myself and my OH are looking to buy our first house.
We are interested in a new build with Barratts that provides the FirstBuy scheme.
After conversations with them I have been told...
1. We HAVE to use their mortgage broker (mortgage integrity) as Barratts are providing the privilege of firstbuy equity loan. Also because they like to keep track of everything.
2. We also HAVE to use their solicitors and survayencing.
3. They do NOT accept offers on propertys, neither do they negotiate deals.

I have since spoken to my independent mortgage advisor who says I am able to use whichever mortgage advisor I want? Are they compleatly having us on as we are first time buyers?

Also, Is there any useful information to do with this scheme etc?
Many thanks,
Kate.

brit1234

K2t wrote: »

After conversations with them I have been told...
1. We HAVE to use their mortgage broker (mortgage integrity) as Barratts are providing the privilege of firstbuy equity loan. Also because they like to keep track of everything.
2. We also HAVE to use their solicitors and survayencing.
3. They do NOT accept offers on propertys, neither do they negotiate deals.

If that doesn't set off alarm bells I don't know what will.

Shared equity schemes like first buy are scams, stay clear. The fact that they want you to use their all their cronies is to guarantee that you overpay as well as their own kick backs.

If you do go for the scheme which I don't recommend use independents (mortgage brokers, surveyors and solicitors) as they are on your side not the builders.

The reason I am against shared equity schemes is because the prices are inflated placing you in negative equity due to small deposits. Then you are subject to the shared equity time bomb when you start to pay the mortgage as well as the equity loan 5-10 years later. You are guaranteed on top of that that mortgage rates will be higher in the future and you will have to pay even more as you won't have the equity to remortgage.

poppy10_2

You are being taken for a mug. Never trust any developer which insists you use its mortgage brokers and solicitors. They act in the builder's best interests, not yours. They will be complicit in overvaluing the property to get you to pay more than it is worth

safc118

Shared equity has its pitfalls and its advantages

The key is the detail. Ive just purchased a house on Shared equity via the homebuy scheme last year

For me it was a way to get onto the property ladder. Assume the following. I wanted to buy a house last year regardless.

For me you don't pay anything for 5 years then after the 5 years you can chose to add the reminder onto the mortgage or pay the interest on the outstanding amount standing cant remember the rate but when i worked it out it was £35 per month and that rate went up with inflation. Between 5-25 years you can continue to do this then after 25 year you have to pay it or sell up!

If house prices go up youve gained equity on your share so :T if prices go down you've lost equity but you can buy the reminder at a cheaper price so its a small way of hedging your bets.

Its for the long term as above has stated prices are likely to go down before they go up but for mid to long term its a good investment or i have found this to be the case.

I worked out the difference between my current mortgage and what the mortgage would be if it was 100% and the difference im putting in my ISA so in 5 years time i can make a big dent in the home-buy share.

For me its gave me my independence to stand on my own 2 feet and start building a better future for myself yeah it will probably be more expensive in the long run but. Aged 19 when i purchased my first house sounds much better than the average age.

:money:

K2t

Thank you everyone.
The scheme is this...
Barratts provide 10% of the house price
The government provide 10% of the house price
Your deposit
Your mortgage on the remainding amount...
E.g.
House = £200,000
Barratts = £20,000
Government = £20,000
Deposit = £8,000
Mortgage = £150,000

The equity loan from barratt & government must be paid back after 25 years. After 5 years you begin paying interest.
You can pay back the equity loan in 2 ways...
1. When you sell your house in a lump sum.
2. In 10% installments (£20,000)

After 5 years the interest is...
1.75% rising by RPI + 1% each year.

Therefore we would plan to either sell after 5 years (or there abouts.)
Or to have saved a reasonable amount over 5 years and to continue this to pay off 10% or even 20%.

Option 1 would probly be more realistic as we would like to get married and our savings will probably go on our wedding. We are 22 & 24 years old.
What are people's thoughts on this set up?
Please be truthful, good, bad and ugly!!
Thank you, Kate.

wymondham

I'm not sure you'll be out of negative equity in 5 years ... plan carefully...

shortchanged_2

I would say avoid like the plague personally.

Think about what is happening here. The builder is trying to dicate terms, everything of which is in their favour.

The property will be overpriced in the first place plus they keep a stake in the equity. They are not willing to budge on their price and are forcing you to accpet their terms and conditions.

If I were you I would continue to try to keep saving a deposit and then you are in a stronger position to make your own terms/offer.

Sorry but as far as I am concerned shared equity is nothing but another scam to try to manipulate house prices to the general detriment of the housing market.

harvey115

prices on the new builds are always above the actual market prices, I think somewhere in the region of at least 15% because the appliances and all other things in the house are new.

With regards to Barratt, their house builds I think are one of the best ones out there. So the value would not be too much off. So in 5 years if you are planning to sell the house keep in mind that the economy is flourishing at the moment and it maybe that the house prices get to the same point in 5 years, you would end up in negative equity simply because the house will not be new any more.

K2t

I believe the price is actually quite good, the house is a 3 bedroom, semi attached, with attached garage with electric, bath room, en-suit shower room and downstairs loo, good size garden and it's not in a extremely built up area like most new builds, and this is on for £210,000. We would offer £195,000. We have been looking for 2 bed terraced houses in our area and it would be about £160,000. We have £20,000 deposit so we can get a mortgage, but if we got the new build we get a much nicer house thats ready to move into and an extra bedroom, also we would only need to put about half of our deposit down = money for savings. I really don't know! It does worry me... Thanks though everyone, opinions really do help!

harvey115

if you credit score is good and affordability is also good, then you could get a 90% LTV with all of your savings/deposit involved.

I think this is a better option then the NewBuy scheme, try a good broker and seek their advice.

The_J

If it's a property you intend to live in for 10+ years then it could work but suggesting you use their own broker, nah, that's not on.

Say you want 50% of the commission they get from the mortgage if you are required to go via their guys.

You're too young for my liking, too naive, and you committing yourself could be a massive albatross around your neck.