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

persa

The more I reflect on this scheme, the more disillusioned I am.

Even if this 20% equity loan was an interest free debt loan, it wouldn't make the mortgage affordable on a property costing £600k. Just because someone will lend me a particular multiple of salary does not make it sensible.

I have a good job, excellent prospects, a healthy deposit - and I'm still priced out of the London market. This scheme doesn't seem to solve anything.

mickael28

josey1964 wrote: »

Trying to get my head round this scheme.

We are on the market and my be tempted by a new build.

We are looking at a property at £180,000. We should make £80,000 from the sale of our home, we have savings of £50,000, so only need a mortgage of £50,000.

Will we qualify for the loan as we have over the 20% deposit or not.

I didn't know you could have just a 20% of maximum deposit, but this is what I found about it:

http://blog.lcplc.co.uk/2013/03/budget-2013-new-help-to-buy-scheme-%E2%80%93-how-it-works/

How will it work?

This option will see the Government lend up to 20% of the value of a new build home through an equity loan. The buyer puts up a deposit of their own of between 5% and 20% – the Help to Buy scheme tops that deposit up to make it a 25% deposit which leaves the buyer needing a mortgage for 75% of the property value.

josey1964

Thank-you for clearing that up for me.

brit1234

persa wrote: »

The more I reflect on this scheme, the more disillusioned I am.

Even if this 20% equity loan was an interest free debt loan, it wouldn't make the mortgage affordable on a property costing £600k. Just because someone will lend me a particular multiple of salary does not make it sensible.

I have a good job, excellent prospects, a healthy deposit - and I'm still priced out of the London market. This scheme doesn't seem to solve anything.

+1
Same situation here, big deposit, well paid job and priced out.

In London its not the deposit level but the price. 80% of newbuilds are sold to foreign investor other investors are buying up the other homes.

The schemes are bad economics and cost the tax payer dear as interest rates go up which they will as the country is downgraded.

NPowerUser

The OBR now saying that scheme will lead to an increase in house prices
http://www.dailymail.co.uk/news/article-2299333/Osbornes-130billion-mortgage-help-scheme-wont-boost-building-drive-house-prices-UP-economy-watchdog-warns.html

Professor Stephen Nickell, a member of the OBR, told the Treasury select committee: ‘The key is: is it just going to drive up house prices – by and large in the short run the answer to that is yes.

‘But in the medium term will the increased house prices stimulate more housebuilding, and our general answer to that would probably be: A bit. But historical evidence suggests not very much.’

eezyrider7

kingstreet wrote: »

Let me state this, once again, very clearly.

You pay back the original percentage you borrowed, not the original cash value.

Therefore, if your original loan was 20%, you would only pay back the same cash amount if the property value was exactly the same as the original purchase price.

If the value of the property has fallen at the point you repay the loan, you repay 20% of that value, less than your original cash loan amount.

If the value of the property has increased at the point you repay the loan, you repay 20% of that value, more than your original cash loan amount.

mickael - you are confusing shared ownership with shared equity. This is shared equity. This will probably replace Firstbuy, the current shared equity scheme, as the two are practically identical. It may be retained, if the Government wishes to retain the maximum income features it contains, perhaps for certain key occupations. Shared ownership will continue as it is, known now, as it is as HomeBuy.

Use this for guidance, for the time being;-

http://www.firstbuyscheme.org.uk/firstbuy.php

To clarify further I have copied the following from the BBC web site:

"Up to 20% of the cost of the home will be funded by a shared equity loan, which will be interest-free for the first five years.
This will in effect see the government taking a stake in the value of borrowers' homes. It plans to invest £3.5bn in these loans.
The value of the shared equity loan is linked to the property's value. So, for example, if the value the property has doubled by the time the shared equity loan is repaid, the amount the borrower has to repay will have doubled, too."


EZ

Thrugelmir

harpoboy wrote: »

I really dont think this is a good scheme.

Unscrupolous folks will claim to have split from their partner, and need to use the scheme to buy a new home.

You can then put down 5%, use the scheme to get up to £120k interest free, and obtain a 75% residential mortgage.

Then declare the smaller flat your PPR, and move into the flat for a few days / weeks before there is a wonderful reconciliation and move back to the marital home.

Net benefit:super low residential mortgage rate, interest free £120k loan for 5 years, and CGT benefits (as the BTL property will be deemed your PPR for the final three years of ownership)

I really feel very uncomfortable with this scheme.

If people want to commit mortgage fraud they will even without this scheme.

PD1

25 years ago I was conned into an 'affordable mortgage scheme', a low cost endowment. This was sold to me by an overweight shark in a suit, thinking only of his percentages......he dished out false information about the mortgage being fully paid off with bonuses, all I have now is a nasty shortfall (and no compensation as my claim was dismissed).

This time the sharks are the government, as they frantically dream up fresh ways to artificially inflate the housing market, while they devalue the hard earned savings of the very people struggling to put a deposit together. If they are happy to encourage this new debt ridden society, what hope is there for our overall economy.