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Help to Buy Scheme

Paully232000
Posts: 2,108 Forumite
Just seen on the barratts website that there is a help to buy scheme funded by the government, 4% deposit needed, and 20% of the value of the property given by the government.
Therefore I would have to get a 76% mortgage from a mortgage lender.
Is this a good scheme, or are there pitfalls in the scheme.
The barratts website only gave basic details of the scheme.
I have more than 4% deposit so i guess i could put more of a deposit down and have a lower % mortgage.
Also, is the 20% payable back to the government in installments like a mortgage or in a lump sum when you sell, and is interest added to this amount?
Sounds too good to be true but maybe i am being to cynical?
Thanks
Therefore I would have to get a 76% mortgage from a mortgage lender.
Is this a good scheme, or are there pitfalls in the scheme.
The barratts website only gave basic details of the scheme.
I have more than 4% deposit so i guess i could put more of a deposit down and have a lower % mortgage.
Also, is the 20% payable back to the government in installments like a mortgage or in a lump sum when you sell, and is interest added to this amount?
Sounds too good to be true but maybe i am being to cynical?
Thanks
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Comments
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You're not being cynical. It's the latest way for the tax payer to help out house builders. There's lots about these schemes discussed already, generally they are slated as poor value.
Don't be fooled into thinking these schemes exist to help the buyers...
Ask yourself a question - why does Barrett (and other builders) need to use a scheme to sell it's houses?0 -
Don't be fooled into thinking these schemes exist to help the buyers...
It would be hard to sit by saying it's a bad idea and watch people in the same position as you get on the housing ladder.
If there is a housing price crash then you still have negative equity, but some of that equity is owed to the government not to the lender, is that right? That seems a less worse position to be in than having all the negative equity owed to the lender.
(this is apart from the pros and cons of new builds, anyway the HTB scheme is extended to all properties from next year as far as I know)
Please don't take this as advice to YEAH! GO AHEAD! DO EEEEEEEET! because as I say I have no real idea. I am just thinking aloud regarding the factors in play here..0 -
Thanks for the replies, I was thinking that (and i could be wrong as have not read all about it just the basics) house prices are what they are, and we want to buy a bigger house now due to family increasing. Like you say a 5 yr interest free 20% does seem like a good incentive on the face of it.
Feel free to correct my thinking:)0 -
Paully232000 wrote: »Thanks for the replies, I was thinking that (and i could be wrong as have not read all about it just the basics) house prices are what they are, and we want to buy a bigger house now due to family increasing. Like you say a 5 yr interest free 20% does seem like a good incentive on the face of it.
Feel free to correct my thinking:)
I think something to consider is the price of the new build house you are looking at v's an older house of the same size.
Where I live I can get a nice 3 bed semi for around £250k or just under, but a new build semi would cost me £325k an upwards... We looked at help to buy as it would work out cheaper for us in the first 5 years as we only have a small deposit to go it alone, but my worry was that after year 5 I have to start paying interest making it more expensive and I still owe 20% equity and I have to find that too or sell up at some point. So we have decided to buy an older house and pay the extra from the start and more importantly stay under the stamp duty threshold!
It's different for everyone but I would definitely look at how much the 'older' houses in your area are selling for v's new builds, just to see the difference.0 -
Paully232000 wrote: »I have more than 4% deposit so i guess i could put more of a deposit down and have a lower % mortgage.
Also, is the 20% payable back to the government in installments like a mortgage or in a lump sum when you sell, and is interest added to this amount?
No. The equity loan is paid off at the end of the (max) 25 year term, on sale of property or by "staircasing" which you can do in two equal lump sum payments.
You repay the loan as a percentage of the value of the property at the time. 20% loan, you repay 20% of the value, not what you originally borrowed.
After five years, you pay a fee each year (monthly) which starts off at 1.75% of the loan amount and this increases each year by RPI - 1%, so it's 1.75% in year six, 1.9% in year seven and so on...I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
If the government cared about people being able to afford housing they would build affordable housing.
Help to buy may work out for individuals now and again, and there are plenty of people sick of renting who are desperate enough to jump in, and not worry about paying it back until they have to.
There was a thread on here a little while ago where a builder withdrew a previously agreed discount when they realised the buyer was using HTB.
The government designed the scheme to pump public money into building firms, and thats exactly what those firms expect to happen.0 -
kingstreet wrote: »
You repay the loan as a percentage of the value of the property at the time. 20% loan, you repay 20% of the value, not what you originally borrowed.
Hi,
I wasn't aware of this. I was of the understanding that the 20% equity remained the same throughout the term of the mortgage, repayable at the end of the term. I had no idea that the 20% equity was liable to rise if the value of your house increased over the term of the mortgage!0 -
http://www.orbithomebuyagents.co.uk/mediaFiles/downloads/49696872/Help%20to%20Buy%20Buyers%20Guide.pdfWhen you sell your Help to Buy home (unless you have chosen to repay your equity loan earlier), you must repay the Help to Buy assistance from a share of the sale proceeds. So, if the Agency assisted your purchase with a 20% contribution, your repayment will be 20% of the total market value when it is sold.
See Page 11.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
You're not being cynical. It's the latest way for the tax payer to help out house builders. There's lots about these schemes discussed already, generally they are slated as poor value.
Don't be fooled into thinking these schemes exist to help the buyers...
Ask yourself a question - why does Barrett (and other builders) need to use a scheme to sell it's houses?
The Independent done a investigation into the lobbying by the big builders. They paid the coonsertavie party £ millions in party donations in 2011 and got back £100s of millions back in tax payer kick backs.
These schemes despite being called affordable housing are designed to push up prices and get more money out of buyer. In 2008 I was offered a discount on a new build flat and all was going ahead till Labour introduced shared equity. The deal was withdrawn and the flat put back up for sale at a far higher price.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
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