Help To Buy, good or bad???

pcollins123

I considering buying a new build and the new help to buy scheme looks appealing on the surface. What are the forums thoughts in this scheme? Is it good? Or avoid at all costs? Or proceed with caution?
Having a75% mortgage will lower my monthly spends and the rate on the loan after 5 years is mug better that a mortgage.

Any advice is appreciated

brit1234

Pretty much every financial organisation including the Governor of the Bank of England who has commented on the scheme has said it is a bad idea. The only 2 organisations to say it is a good idea are the builders who get free money and the Tory party who are paid millions in party donations by the same builders

The simple fact is you are overpaying for a small poorly constructed newbuild with a 5% deposit. In other words you are at extreme risk of negative equity.

You also have to pay the 20% loan back and interest on it after 5 years on top of your mortgage.

There is also no guarantee that banks in the future will provide good mortgages to remortgage to.

Under this scheme there is higher risk of negative equity, being trapped in the property unable to move to a bigger one as your family grows and generally higher costs. Do you research.



He is what the papers say:

LittleMissAspie

I'm against these kinds of schemes because I believe a roof over your head should be affordable in the first place. Taxpayer's money shouldn't have to be used to help people buy a house. You either have such a low income that you can't afford anything in which case you get housing benefit or a council home, OR you have an income above the very lowest which should get you a roof. (And some walls.)

From a buyer's point of view I think one can take advantage of the schemes if you work out your sums correctly. The trouble is, a lot of people who go for the scheme won't work out their sums correctly, otherwise they could afford more than a 5% deposit in the first place.

If you are savvy and save up the 20% and pay it back in full after 5-6 years then it could be a good deal.

pcollins123 wrote: »

the rate on the loan after 5 years is mug better that a mortgage.

You don't know that. You don't know what the base rate will be in 5 years. You don't know what the mortgage market will be like in 5 years. You don't know what RPI will be in 5 years. You don't know how many lenders will be prepared to be part of this scheme in 5 years and what rate they'll offer you. Make sure you can afford the worst case scenario.

Edit: Interesting tidbit. Brother in law has been looking at a house for sale under this scheme. There is only one lender who will lend on it and they have valued the house at less than the builder wants to sell it for. Builder doesn't want to budge. Lender obviously won't budge. And so the house remains unsold...

okborednow

Edit: Interesting tidbit. Brother in law has been looking at a house for sale under this scheme. There is only one lender who will lend on it and they have valued the house at less than the builder wants to sell it for. Builder doesn't want to budge. Lender obviously won't budge. And so the house remains unsold...

Interesting indeed. I'm confused what the builder is hoping to achieve though...If BIL has to walk away do they think another buyer will have a lender who will value it for more? Or are they hoping for a buyer with a big enough deposit that the difference won't matter. If so it seems a risky proposition to me. You know the old saying about a bird in the hand...

pcollins123

Thanks so far, does it change anything at all if the house I'm buying is big enough for my family, I've chosen it to last us until we think about downgrading in many years to come, u hoping to be in the house 25 years. It's being built by a local builder who has win national awards and many say the quality is second to none.

Thrugelmir

The scheme has a very targetted approach that will help a certain group of applicants to get a first step on the ladder. As Mervyn King said, the scheme should not be a permanent fixture. At the current time though there is a place in the market for the scheme. As it enables the whole market to keep moving. Without FTB's the residential property market really would come under downward price pressure.

pcollins123

I should add I'm a second time buyer buy our home with my wife for our first house together, we are looking at this as our forever house.

I was also thinking about paying 10% deposit and either a 15 or 10% loan to get a much better rate. Is this worth thinking about.

mrginge

Can kicking at it's finest.

Trebles all round for the developers and knack all for anyone else

kingstreet

pcollins123 wrote: »

a 15 or 10% loan to get a much better rate. Is this worth thinking about.

You don't get to choose. The HCA HomeBuy Agent works out your entitlement and it's 20%, 10% or nil.

pcollins123

kingstreet wrote: »

You don't get to choose. The HCA HomeBuy Agent works out your entitlement and it's 20%, 10% or nil.

I never knew this, how do they work out you entitlement?

kingstreet

Using the HCA Help To Buy calculator. It is done by the HCA HomeBuy Agent for your area.

It uses some assumed data on income multiples, debt to income ratio, mortgage rate etc and works out what you can and can't do.

Call the local HCA HomeBuy Agent and they will run your details if you ask nicely. Otherwise, try one of the brokers on the Agent's panel.

For Eastern England & Midlands it's Orbit and for the SE it's Catalyst for example. The full list is in the two back page of this;-

http://www.orbithomebuyagents.co.uk/documentHandler.cfm?dld=3217&pflag=docm93jijm4n3217.