Help to Buy Advice please

demontfort

No problem and as I say good luck with everything. Just out of interest what’s your profession as that’s some pricey career development? Looking at your overall situation I’d take a year or two to straighten out your finances and wait for the government schemes to bed down. On £80k gross and rising you should be able to quickly clearly away your wife’s debts, start hammering into your loan and adding to the gifted deposit. House prices are falling most places except for a few exclusive areas of London and a handful of plush towns in the South East.

Yes you will have to pay more rent in the meantime but you're fortunate to have a large income. You just need to be patient and use that income to clean up your balance sheet. That will give you a much greater choice of mortgages, much better rates and on a decent salary for a £200-250k mortgage you can then aim for a short repayment term. Have a play with the online mortgage calculators to see how much difference a few % interest and a shorter repayment term will make to the amount of interest you shell out over the life of the mortgage.

frazoz

I'm not a mortgage advisor but I am an accountant and it was me there are a few questions I would want answered and also some additional things you need to think about:-

You have stated that you are being gifted the deposit but do you have savings for the extra costs involved when buying a house, I have worked out that for us to buy a £250k house the additional costs, stamp duty, mortgage fee, valuation fee, booking fee, solicitors fees etc etc would be approx £4k. However, for you getting a £300k house the stamp duty would increase from 1% to 3% so and additional £6.5k.

With regards to the actual mortgage

1. What rate of interest will you get and for how long and what is the lenders SVR (if you decide to to get a fixed rate mortgage) and can you afford the mortgage on the lenders SVR or if the Base Rate rises?

2. With the Equity Share I've read that it's linked to the house value at the time you either repay the "loan" or when the mortgage is finished, which is a maximum of 25 yrs or if you sell the house...so where does the value of the house come from? It is Estate Agents Valuations or House Price Index.

You will have to save this money to pay back the loan but be able to account for the rise in value of the property you buy along with the interest rate charges incurred after the 5 year interest free part is over.

You can also only get a mortgage that lasts 6 months so are there any New Build Houses you like that will be built in this time frame as if there isn't the lender may extend your mortgage deal (they don't have to) but you may then lose your booking fee would can be from £0 to £1500 but also the interest rate so again what's the max interest rate you can afford to pay a mortgage on.

If I have said anything that's incorrect please correct me as its just whats I've read (so may not be completely accurate) also I hope you don't think I'm going onto much about your affordability as I'm sure you have considered this fully.

Hopefully I've said something that can help you...GOOD LUCK

I personally can't wait to get a bigger house, my husband, dog and rabbit have been in a one bed house for over 5 years as we are trying to save.

maddocks_2

My and my partner just had an approval in principle (we're still not sure on going through yet) on the scheme.

Similar levels of debt and income:
Partner: 55k
Me: 32k

CC balances & loans:
Parter:
loans: 505/month (23k remaining)
CC: total 11.5k
Me:
CC: 3.9k (I pay about £400/month off, not including the money that just goes in and out each month normally for work expenses)

House value: 310k.

We were actually on the cusp of being too well off to get the govt loan at all, and in fact this is 15% not 20% help.

They are aiming for the mortgage payment plus other debt to be 30-45% of your overall outgoings. We were actually jokingly suggested to go for a bigger house(!) This is perhaps some dark scheme to put more money in ze banks...

frazoz

Ive just read the latest post and am even more confused about this scheme as I haven't seen any literature stating you need to have a % of debt (technically) to get accepted on the scheme.

My husband and I are lucky to earn a good income between us £95k+ and we only have £5k debt.

Before anyone has a go we have a house but its a one bed and I bought it at the top of the market so apart from spending money on getting married, clearly my husbands debts and the neg equity we now have a approx £5k in the house after saving like crazy for 5 yrs and are able to save £2k a month now, I also got a whopping pay rise after qualifying which had enabled us to do all this.

So by what Maddocks has stated below we would potentially at 30% debt need to be paying a mortgage of £1300 would that also be on a LTV of 75%.

Is it me or does that seem crazy????

Why would you want to put people in a situation where potentially if something major happened like...one of them lost their jobs they couldn't afford to pay the mortgage.....isn't this putting the Government (Takepayer) money at risk?

The more I read about these schemes the more I feel that they are being used for other motivates and not to really help people, real shame.

CrispyUK

I think the affordability criteria is designed to do two things:

• Ensure potential purchasers under the scheme do not overstretch themselves in making the purchase.
• Prevent people who don't really need the assistance from getting it to keep the funding available for those who need it.

Some of this is based on FirstBuy but should be very similar for Help to Buy. Broadly there is two affordability checks:

• Mortgage amount is between 2.5 - 4.5 times household income.
• Monthly costs (mortgage repayments, service charges and equity loan interest) are between 30% - 45% of household income.

Household income is the total of salaries and benefits minus monthly debt repayments (loans, hire purchase, credit card payments).


If someone was looking to use Help to Buy but the checks came back that their mortgage amount would only be 2 times their income and only 20% of their household income would be spent on the mortgage then they wouldn't be eligible as it would be considered they could purchase via other means, perhaps NewBuy or a conventional mortgage.


Similarly if it was deemed that an 85% mortgage + 5% deposit was affordable (based on the above checks) then the applicant would only be offered a 10% equity loan rather than the full 20%.



This is why you're seeing some suggestions that people look at a more expensive property or take on some more debt, so that they fit into those affordability checks. Whether that's a good or bad idea I wouldn't like to comment!

Thrugelmir

frazoz wrote: »

Why would you want to put people in a situation where potentially if something major happened like...one of them lost their jobs they couldn't afford to pay the mortgage.....isn't this putting the Government (Takepayer) money at risk?

Underwriting on these schemes is going to be very tough. With lenders continuing to look at affordability very closely. Borrowers need to appreciate that lenders can choose their customers. So a solid credit record is almost becoming a basic requirement now.

orcocan

to the OP without getting too personal, I'd suggest you put your finances in order before taking on more debt, on your incomes there's go no good reason to have 8k credit cards and o/d's and no savings.
Most lenders would question your ability to manage your own finances like people have done here. My advice would be to make the necessary adjustments to your lifestyle to clear up all your credit cards, o/d's, etc. (these should be repaying quickly not slowly...) then try to overpay your postgraduate debt as much as you can, then in a couple of years look at your situation again and decide what to do. Taking on more debt right now to purchase a new build with a gifted deposit (=negative equity) when you're clearly overspending is very risky. Should anything happen to your situation (either of you losing their job for instance) you'd be in deep trouble. Get your priorities right... best of luck

andy_vip

For those who may have been interested, we have been approved in principle through Barclays/Woolwich and their springboard mortgage, so we don't have to borrow from the government, we still have the deposit from other halfs nan, and the 10% to be held in savings account is coming from her father, who just has it sitting around anyway. We have also paid off 2 of the credit cards and saved £4000 so far for fees etc.

michaels

andy_vip wrote: »

For those who may have been interested, we have been approved in principle through Barclays/Woolwich and their springboard mortgage, so we don't have to borrow from the government, we still have the deposit from other halfs nan, and the 10% to be held in savings account is coming from her father, who just has it sitting around anyway. We have also paid off 2 of the credit cards and saved £4000 so far for fees etc.

I note you can pay of your career development loan from gross salary - this sounds a very useful 'perk' and you should probably think about maximising the value of this - perhaps only paying off using higher tax rate income (assuming your payments are flexible)?

andy_vip

Unfortunately it's not flexible and the payments as well as the tax benefits are fixed. It's still a good deal though.