FirstBuy scheme refused

mcsmik

Well we have just been refused to be given the governmental 20% because we're earning too much, allegedly. The new build 2 bed property value is 90k. Which means a deposit of 4.5k which we raised. It isn't in our accounts yet as it's a family gift.

The scheme should have given us 20%, which would mean a 67k mortgage after the 4.5k deposit. I earn 20.5k and my wife is on 17k. Apparently we earn too much. Now we've submitted an application for a 95%, assuming we're approved we could go with that, but it would mean a higher interest rate, but no loan to give back to the government. Any ideas or suggestions?

ACG

Go for a 95% mortgage like you have done?
Raise a bigger deposit?

There isnt many other options available to you.

mcsmik

ACG wrote: »

Go for a 95% mortgage like you have done?
Raise a bigger deposit?

There isnt many other options available to you.

Is there anywhere you can point me to get a good read about the 95 LTV? I've searched the web for a while, but don't get much good on it. I am mainly scared of the fact that after the fixed term is over a) how much is the percentage likely to change? b) is it right that it's pretty impossible to get a re-mortgage given the fact that I am originally on a 5%? - Most deals seem to offer good deals only roughly at 20%-40% deposits... - I take it when re-mortgaging you don't pay another deposit? - I know may sound like silly questions but I'm quite new to this and am afraid to put us in trouble

kingstreet

FirstBuy has now been replaced by HTB. You no longer need to make an application like you did before. The income restrictions and bedroom quotas have gone too.

This is what Orbit, the HCA Homebuy Agent in our area says;-

http://www.orbithomebuyagents.co.uk/main.cfm?type=HELPTOBUY2

Help to Buy Equity Loan is designed to help you buy a newly built home from a participating developer, whether you are a first time buyer or an existing homeowner. Unlike previous schemes, there is no upper income cap for buyers.


The Government will give you an equity loan of between 10% - 20% of the value of your property to help you buy. There is no interest to pay on this loan for the first five years.


The equity loan will be a 2nd charge on your property and will represent a percentage of the value of your property. So when you pay back the loan, you will pay it back as a percentage of the current market value of your home. For example:


Your home cost £200,000 when you bought it and you had a 20% equity loan of £40,000. If your home is worth £300,000 when you sell it, you will pay back 20% of £300,000 ie £60,000


Your loan must be paid back either when you sell your property or at the end of 25 years, whichever is sooner.


You will need a conventional mortgage from a qualified lending institution and a minimum deposit of 5%. Don’t forget that you will also need enough money to pay for your legal fees, costs of moving, and stamp duty (where applicable).


Your Help to Buy home must be your main residence – you cannot use this scheme for Buy to Let.

You do not need to complete the Orbit HomeBuy Agency application form if you are only interested in applying for Help to Buy. Once you have found a suitable property (newly built from a participating registered developer), you will need to follow these steps:

Fill in a Property Information Form from a registered developer. Complete the relevant reservation paperwork with the regstered developer. Submit both forms to Orbit HomeBuy Agents by emailing them to us at hbd@orbit.org.uk (or post to us at Orbit HomeBuy Agents, Garden Court, Harry Weston Road, Binley, COVENTRY CV3 2SU).

We will issue a document called an Authority to Proceed. NOTE – please do not apply for a mortgage prior to receiving this document
Your Authority to Proceed will then outline the next steps – please ensure you have read the Help to Buy “Buyer’s Guide.”

Southend1

Personally I'd save a bigger deposit and steer clear of these "schemes". Should be doable on your incomes. Unless there's a particular need to buy sooner rather than later?

CrispyUK

The FirstBuy / Help to Buy schemes work on a 4.5 times income multiple to assess affordability, if you can afford a 90% share you'll only get a 10% equity loan, if you can afford more then you won't get any help.

£37.5k income x 4.5 = £168,750 which is why I think you're going to have problems getting accepted. On a rough calculation you'd need to be looking to buy a property in the £200k-£220k region to be eligible for a 20% equity loan.

NewBuy is still available and an option, because of the higher rates (and it does depend what rates overall do) you could find your payments/rate drops at the end of the fixed period. Perhaps one option would be a NewBuy mortgage that allows you to overpay without penalties if you could afford to do so, putting you in a better LTV position for re-mortgaging in future.

kingstreet

The Guidance notes read "upto 4.5X" and the HCA HBA "will ensure monthly costs, charges and fees are under 45% of net disposable income."

Under the FB and HBD calculator, there was an income multiple range given of min 2.5 to max 4.5. AFAIK HBAs are still dishing out the same calculators, so are they still using discretion, or is everyone getting lumped on 4.5 x income?

droiderm

Am I reading this right?
To be eiligbile for Help to Buy, you need to be pusing your affordability to the limit?

kingstreet

Crispy is referring to things which are in the HTB Guide issued by the HCA back in March. They are adapted from FirstBuy, but we don't yet know how the HBAs are going to interpret them.

http://www.orbithomebuyagents.co.uk/mediaFiles/downloads/49696872/Help%20to%20Buy%20Buyers%20Guide%20270313.pdf

Certainly there is an income section in the Property Information Form which will be required but we don't believe the vetting process will be as tight as it was for FirstBuy.

The proof of the pudding is only going to show up in the coming weeks. We are only four days in, after all...

droiderm

I will watch this space with interest.

There does seem to be something dodgy going on, potentially pusing people to affordability limits, with a interest free tax payer loan....

maninthestreet

With a joint income of £37.5k, why have you been unable to save any money for a deposit (you say the £4.5k is a 'family gift') ??