Help to Buy Scheme - New Build Negotiation

NHSSLAVE

Have a son entering into the 'Help to Buy' scheme....cannot seem to get through to him the cost implication of the 'Governments help' I am confused at the percentage he would pay after the five years interest free period and its annual increase. I interpret this as 1.7% in the first year and increasing a minimum of 1% each year thereafter...so 15 years and 20 years down the line he could be paying an astronomic amount in interest? and still have the full 20% + any increase in the housing market to make the 20% payback a non achievable amount. Negative Equity and house repossession comes to mind. Feedback greatly appreciated. He was also informed that on the new buy he would not get a mortgage if they offered things like carpets, turf etc...as this would then make the property worth more than the stated price...tosh?? would love to have a word with this sales person!
worried parent!

okborednow

Well i've reserved under Help to Buy and while i know that the potential for huge rises in the amount i have to pay on my equity loan is a possibility my plan is to pay as much off the mortgage as i can for the five years the loan is interest free and then hopefully i'll have enough equity to remortgage and take on the extra 20%. Obviously i know anything could happen to house prices, interest rates and the mortgages available on help to buy by then but all i can do is try and cross each bridge as i come to it.

In terms of incentives the saleswoman threw in flooring throughout and all white good for us and the valuation came back with no issues at all so if they say they can't offer anything then they're telling fibs.

Hope that helps

seriousDFW

It will really vary hugely based on a large range of factors. As some have given examples of, there are good deals to be bargained for.

But it's not always the case. With NewBuy they are more reluctant to offer discounts on price as they have to contribute to the indemnity fund to support the scheme. With Help to Buy EL that isn't the case so could be more likely to get a discount.

With regard to extras, this will come down to how difficult they perceive the house to sell. We have just bought and got some extras free, but they wouldn't give us as much as I hear some others get because they didn't think the plot would be difficult to sell (and this is definitely true - the house is a particularly nice plot, one of only a few of that housetype and being sold near the end of the development). If you wanted to buy a house where there's lots of them, the plot isn't exceptional and they're struggling to sell them, I'm sure you could get much more thrown in - you have to judge what you think is reasonable.

thedalmeny

It's the increase in RPI + 1%

I wouldn't worry to much about payments getting out of control, here is an illustration based on a 40k Help To Buy Loan and fee with RPI at 5% (RPI has been 5% or below since 1992....).

Remember, what the vast majority of people expect to happen is that people will remortgage after year 5 and bring the loan into their mortgage. This obviously relies on peoples property maintaining the price they purchased it for.

Turnbull2000

thedalmeny wrote: »

Remember, what the vast majority of people expect to happen is that people will remortgage after year 5 and bring the loan into their mortgage. This obviously relies on peoples property maintaining the price they purchased it for.

Yup, that's why it's imperative the government promotes house price growth over the next few years. The planning 'reforms' they've implemented will barely make a difference (which was probably their intention), so housing supply should remain critically low for a very long time. Combined with Funding for Lending and interest rates remaining ultra-low until at least 2020, the potential for large price rises are being put in place. Some may argue that Funding for Lending and Help to Buy will expire in 2015. But trust me, they won't. They'll become too deeply entrenched into pricing, and their removal would threaten price stability.

thedalmeny

Turnbull2000 wrote: »

Yup, that's why it's imperative the government promotes house price growth over the next few years. The planning 'reforms' they've implemented will barely make a difference (which was probably their intention), so housing supply should remain critically low for a very long time. Combined with Funding for Lending and interest rates remaining ultra-low until at least 2020, the potential for large price rises are being put in place. Some may argue that Funding for Lending and Help to Buy will expire in 2015. But trust me, they won't. They'll become too deeply entrenched into pricing, and their removal would threaten price stability.

The main problem with housing supply is land supply and the value of land, which is many support LVT to stop people sitting on land or land speculation. Obviously the economic situation has worsened that situation - but the financial crisis is not the root cause of our housing issues.

In my opinion, i think the housing supply in the U.K is always going to be a problem. I don't think that's going to change without some radical shifts which will never occur.

I've recently purchased a new build with 'Help To Buy', got 10k off purchase price, extras and stamp duty paid through Halifax mortgage offer. Providing you get a well priced new build property in relation to the open market, it's a very good offer in terms of cost. Undoubtedly though some areas of the U.K new build property is grossly overvalued. Also, i went for HTB within the first 1-2 days of it starting. From what i've read on several forums, allot of people struggle to get reductions or extras from developers.

I do think that anyone who has purchased in the last 6 months are pretty much buying at the bottom of the market, i can't see house prices doing much but going up (with occasional periods of stagnation dependent on the rest of Europe).

I also think the second phase of HTB for the open market is going to be far more restrictive, mainly due to the success they're having with the new build phase i don't think they'll feel the need to push.

gazzabboi

Gb109590 wrote: »

Evening all,

I'm hoping someone on here may be able to offer some advice on purchasing a property on the new government scheme, Help to Buy?

I have been putting some figures together and think I am in a position to be able to buy a new build property later in the year. I have done all my research and spoken to an IFA who confirms I meet all the required criteria for the Help to Buy scheme and now its just a matter of deciding when, where and what I would like to buy.

I am just wondering if anyone has any experience buying under the scheme or similar government help schemes and particularly what sort of price negotiation is achievable? Can you still negotiate when purchasing through the scheme and what discounts and savings have other people secured?

The house I am looking at is £184,000 so I am wondering what offer to make and if the fact that I am purchasing through Help to Buy makes any difference in terms of being able to haggle!

Any help, thoughts, advice would be greatly appreciated.

Many thanks

Depends where you are buying I guess. I personally went round the developers at Colchester last week looking at properties for about 200k and I have 50k deposit, they wouldn't even knock 5k off for me. They said the reason being that they don't need to as everything is selling quick. Best they could do was to include carpets.

thedalmeny

Personally, i looked at HTB over a 2 year cost as a first time buyer, mainly as i'm pretty confident house prices will hold or grow and remortgaging in 2 years is going to be relatively simple.

First things to note however, on repayment of your government loan you have to pay back at the current value of your home. I'm not buying in London but it's something to consider if you are, since prices can jump rapidly in that part of the country.

Now i had access to a 15% deposit when i looked at buying a house, below is an example of mortgage repayments and potential rates as a First Time Buyer on a £182,000 property (Like the one i purchased). All calculations assume mortgages below have no arrangement fee (As my HTB Mortgage didn't).

As an example:

HTB: (5% Deposit, 20% Government)
Mortgage (3.59% First 2 years): £698.25

Without HTB: (5% Deposit)
Mortgage (5.79% First 2 years): £1105.36
-£407.11 (Additional cost over fixed term: £9770.64)

Without HTB: (10% Deposit)
Mortgage (4.59% First 2 years): £929.08
-£230.83 (Additional cost over fixed term: £5539.92)

Without HTB: (15% Deposit)
Mortgage (4% First 2 years): £825.22
-£126.97 (Additional cost over fixed term: £3047.28)

Lets say over the course of the next 2 years (When i plan to remortgage and add the government loan into my mortgage) my house rises in value by around 5%, which i'd say is unlikely in the North West but plausible...

That would mean the value of my £34580 20% loan from the government would of increased by 5% (£1729).

Either way, i saved money (Several thousands) using Help To Buy. Mainly as it allows FTB with deposits of 5-15% access to lower rate mortgages. Also means i've had to outlay less capital.

Now that relies on the fact you want a new build, which we did as we are fortunately buying in an area where new build property is competitively priced against the open market.. This won't be the case for some..

gazter

Turnbull2000 wrote: »

Yup, that's why it's imperative the government promotes house price growth over the next few years. The planning 'reforms' they've implemented will barely make a difference (which was probably their intention), so housing supply should remain critically low for a very long time. Combined with Funding for Lending and interest rates remaining ultra-low until at least 2020, the potential for large price rises are being put in place. Some may argue that Funding for Lending and Help to Buy will expire in 2015. But trust me, they won't. They'll become too deeply entrenched into pricing, and their removal would threaten price stability.

Actually the planning changes can and will make a difference, if that's what local councils want. It is largely in their hands now. As it should be.

bigmedsi

We have just reserved a Taylor Wimpey home under the HTB scheme - they stated repeatedly they could not lower the price directly due to the restrictions of the HTB scheme and problems with getting the government loan accepted. However they have given us £5100 worth of extras inc flooring and fully integrated kitchen appliances (they had already added that before we even asked). The garden will be fully fenced and turfed too.

That obviously works for them because those items are relatively cheap for them to offer and mean more to us.

I have a couple of friends who have been told the same by Charles Church about the price being non-negotiable but getting appliances for free.

It's a shame but new houses in our area seem to be flying off the shelves, as it were.