MSE News: Budget 2013: Help to Buy mortgage scheme to launch

dotdash79

I expect you to get a better mortgage rate with 25% stright than any product in this scheme. The difference than you would get from saving the 20% deposit and using the intrest won't be worth it.

biglugs

shortchanged wrote: »

The other point is this scheme is only running for 3 years, so what happens after that?
People wanting to buy after the 3 year scheme runs out will be unable to buy?

After 3 years we will have a Labour government and everything will be working fine, so no need to prop up the economy any more :rotfl:

biglugs

andyscott wrote: »

maybe we need to start solving the crisis in this country by teaching kids about finances in schools instead of forcing them to learn foreign languages that 99% of them will never really use seen as though english is the 2nd most used language in the world.

How ironic then that your post contains so many examples of poor English!

biglugs

moriarty888 wrote: »

I assume that people trying to buy after 3 years will have 20% less money than people using this scheme, so the vendors will have to drop their prices by 20% and then be stuck in negative equity. Unless they can pay off 20% of their mortgage in 3 years...

This is not going to turn out well

The scheme will be open to applicants for 3 years, not end after 3 years.

You will be able to carry on with the government owning 20% of your property (although the fee will be payable after 5 years, as we discussed earlier).

The intention is that as you pay off some of the capital on your mortgage after a few years you will either remortgage and clear the equity loan, or over-pay and clear it that way.

kingstreet

dotdash79 wrote: »

I expect you to get a better mortgage rate with 25% stright than any product in this scheme. The difference than you would get from saving the 20% deposit and using the intrest won't be worth it.

You do. Even on shared equity you get a 75% mortgage product, not a 95% rate.

kingstreet

Can I clarify that you own 100% of the property with a mortgage and a second charge secured on it. No-one else owns a portion of your home. This is not shared ownership.

biglugs

Bark01 wrote: »

If I can afford to go it alone would this scheme still make sense to use? The scenario I’m thinking of is:

I’m a FTB with a 25% deposit
I use 5%of this as a deposit
Use the government 20% scheme to up the deposit to 25%
Stick the 20% of my money that I have not used in a savings/investment scheme for 5 years.
Then when the government wants the 20% back pay it straight off and pocket the 5 years interest from my own investments?

Sounds to me like a very sensible plan - with one caveat. The investments into which you put your other 20% would have to be pretty sound. And given current Cash ISA rates you are unlikely to see much investment return.

On the other side of the coin you could invest that 20% in more risky investments, and hope that you gained more. If it all went pear shaped though you would be paying a 1.75% rising fee on the 20% until you paid it off.

kingstreet

You also pay back 20% of the value of the property when you repay the loan. You don't repay only the £ amount from when you purchased.

biglugs

kingstreet wrote: »

Can I clarify that you own 100% of the property with a mortgage and a second charge secured on it. No-one else owns a portion of your home. This is not shared ownership.

You are correct - the Help to Buy Equity Loan means you have three pots of money to buy your house:
- a 5% deposit from you
- a 20% loan from the government at 0% interest for 5 years
- a 75% mortgage from a mortgage lender.

You own the entire property - in exactly the same way as if your mum and dad lent you money for the deposit.

This is only for New Build properties though, which are often over-priced compared to previously owned.

On the positive side if you can secure a 75% mortgage at a lower rate than a 95% one, you can use the difference to save up and overpay some of the government loan after the 5 years, as a way of reducing your exposure.

daverave7

kingstreet wrote: »

You also pay back 20% of the value of the property when you repay the loan. You don't repay only the £ amount from when you purchased.

Is that correct? Although, I also read it on the BBC. If true, it's not really an interest free loan is it?