New Buy Mortgage

Pjrv

Hello, I'm interested in the new buy mortgage deal but really haven't been able to get to grips with what it entails and what I'll be paying back.

I'm going through a divorce am 41 and have 2 kids living with me and looking to buy at around the £300k mark (would love it to be less but in the SE that's as good as it gets)! I can get the 5% deposit and if I'm correct think there's a government loan of 20% then mortgage for the remaining 75%.

I can get a decent estimate of the mortgage repayment (although any advice on how much that would be is gratefully accepted, every time I try to see I just sign up for a call back from a broker!). What are the repayment arrangements for the 20% government loan though? I think it's interest free for 5 years then goes to 1/2% after that. I'm trying to get an idea of what my monthly payment would/should be.

As I'm 41 I really don't want to wait too long as I already have to get a 24 year mortgage rather than 25. Thanks for any help.

cloudy11

I can't really help, but what you're referring to (20% loan/ 75% mortgage) is actually the Help to Buy scheme.

The Newbuy scheme is a 5% deposit and 95% mortgage on a new build property.

kingstreet

The equity loan is interest-free for five years, then it changes to interest only from year six onwards. Each year, the rate increases in line with inflation, plus 1%.

So, it's 1.75% in year six, 1.9% in year seven and so on, if inflation runs at 5%pa.

Using your example, you'd have an equity loan of 20% or £60,000, if you qualify. The monthly payments in year six would be £87.50 and in year seven £95.00.

The equity loan is repaid when you sell, or at the end of the term. You can also pay it off earlier, with a lump sum payment, or two. Remember, if you get an equity loan of 20%, you pay back 20% of the value of the property, not what you originally borrowed in £s.

kingstreet

£225,000 mortgage 3.19% (Halifax AH 2 year fix) 24 years = £1,119.09 per month.

Pjrv

Thanks, that's very useful (both posts).

Pjrv

I was thinking I'd not over stretch myself so that I could start paying back the loan as I'm paying the mortgage. I suppose though, if I'm able to afford it, I would be better off paying extra on the mortgage as it's at a higher rate.