Help to buy and Halifax issues

kingstreet

74hotspur wrote: »

It's not profit, it's a loan to be repaid interest free in 5 years or at 1% thereafter, scheme aimed at getting buyers into the market with a 75% ltv mortgage although it seems not to be working that way!!!

Not quite.

You repay the percentage you receive as a percentage of the property value at the time you repay.

20% of your £500,000 is £100,000. If the property value increases to £600,000 before you repay, you'll repay 20% of that, £120,000.

The "fee" charged from year six onwards is 1.75%, increasing by RPI + 1% each year. If RPI is 5%, in year seven you'll pay 1.87%, in year eight 2.0% and so on. This is merely interest. It is not repayment of any of the actual loan capital.

From my experience of FirstBuy, I'd say Halifax has always been the most "flexible" of the lenders offering shared equity products. Even if the same lenders join HTB, Nationwide, NatWest, Barclays and Leeds Building Society, I feel that if Halifax won't lend to you, none of the others will either.

kingstreet

Simon_gloster wrote: »

Interesting, I thought affordability was based on what you want to borrow nit the loan plus builder contribution. Is this right and they take the equity loan into account for lending purposes.

Halifax doesn't. But Nationwide, as an example, has always requested 3% (pa) of the equity loan be added in to affordability each month on such cases.

74hotspur

Yes that's what I was led to believe but the lender states its classed as a 95% borrowing and you are scored on that basis. I'm sure that they will take into account the equity for affordability, the government also does an affordability check too and they must think that I can afford it otherwise they would not have offered the 20% for the scheme. I hope that it gets sorted otherwise if lenders are going on the 95% risk then the scheme will not work. The scheme is supposed to take the risk from the lender.

demontfort

£100k interest free government loan for some spendthrift rich kid to splash out on a half million pound property, it makes you weep.

In these times of austerity with food banks working overtime what a splendid use of taxpayers money. Osborne you're a clown!

Thrugelmir

74hotspur wrote: »

The scheme is supposed to take the risk from the lender.

No its not. Lenders still carry a risk. Is to help lenders fund high LTV mortgages.

A 95% mortgage requires around 8 times the capital to be held compared to a 60% LTV one.

Hence the reluctance of lenders to advance funds at high LTV's. Those that do have to charge high rates to make them economic. Which merely compounds the problem for the potential borrower.

74hotspur

So basically what you are saying is that the scheme is flawed then? No lender will lend upto the 600k limit?
All of the info from the government suggests that the scheme is aimed to reduce the risk to the lender.

Thrugelmir

74hotspur wrote: »

So basically what you are saying is that the scheme is flawed then? No lender will lend upto the 600k limit?

Not at 4.5 or 5 times income though. On a lower income multiple lenders will.

Those crazy lending days of the early 00's are well and truly over. Precisely what caused the problems for the failed banks.