Help to buy: Mortgage Guarantee 'formula'/calculator?

csquare_2

Hi there,

Just a quick question, about the Help to Buy Mortgage Guarantee scheme. If I were to put down £8k on a house (5% deposit of £160k), what would happen to the other £32k? Would the government expect me to pay this back?

In other words, what value of house should I be looking for? I mean, if I were realistic, I would be searching for a £100-120k property (studio) but there's nothing really out there on the internet which suggests what kind of affordability with regards to the HTB Mortgage guarantee scheme could offer.

Would it be possible to buy a £160k place with the £8k deposit, gov makes up the 20% deposit and you take out a £120k mortgage?

And I pay the £32k 'guarantee' back in 5 years or face interest fees?

(I have searched the forum for this but I couldn't really make sense of the answers).

I earn £26k
Savings £16k

Live in London.

Was wondering what kind of scope I have for house values I should be searching for? I am more than a little confused. Some days I interpret it as "yessss, I'll buy a £160k pad" and others I'm more conservative in measure and think of buying a £115k studio.

Really confused!

Regards

kingstreet

Do you mean HTB Equity Loan?

Mortgage Guarantee doesn't start until January next year and it's nothing like this.

Are you looking to buy a newbuild with a 20% equity loan?

If you are, this is interest-free for five years, then a "fee" is payable, starting at 1.75% pa, increasing a little each year at a level determined by RPI + 1%, so if inflation is 4%, the year seven cost would be 1.87%, year eight 2.0% and so on.

You repay 20% of the value of the property when you sell, or at the end of the term if you retain the property until then.

csquare_2

Hiya,

I'm looking at buying an existing property come January and hope to make use of the HTB MG.

I know I don't have the two mixed up but the details regarding the HTB MG are so scant I can't make head nor tail of what the details so far mean!

Thanks

kingstreet

You'll get a 95% mortgage and the Government will run a guarantee fund to cover lender repossession losses.

AIUI you will not have to contribute to this, nor are you liable for its debts. You will, however, remain completely liable for the whole mortgage amount, regardless of anything paid to the lender by the Government fund.

It's early days yet and it was only announced yesterday it will be operated by UKAR, the body winding down NRAM and Mortgage Express.

More will come out in the coming months.

csquare_2

OK - thanks for this. I'll sit tight and wait for more breaking news on the matter!

Here was me thinking I'd be able to get a swanky £160k London bach-pad and with a 75% mortgage.

As you said, it's early days so hopefully there'll be some better explanation shortly!

kingstreet

This is the only official guidance;-

http://www.helptobuy.org.uk/home-ownership-schemes/help-to-buy-mortgage-guarantees/

It is different to the equity loan scheme for newbuilds. There is no interest-free loan attached to it.

The best thing you can do is read about NewBuy, as it's that, repackaged for second hand property;-

http://www.helptobuy.org.uk/home-ownership-schemes/newbuy/

csquare_2

OK, I get it. So it's basically a scheme for those with small deposits to get on the ladder.

My two understandings on it were the aforementioned above and also something more akin to the HTB Equity Loan for new builds. I thought that it'd take on similar form to that.

I think I'll continue saving for my dream pad, in other words! Not sure as to how the HTB MG will benefit me, then.

Will probably buy a 'cosy' studio apartment to get my leg-up onto the property market.

Thanks!

kingstreet

csquare wrote: »

Not sure as to how the HTB MG will benefit me, then

It may get you a 95% mortgage if you might have struggled to get one before/now.

csquare_2

Thanks a lot.

You've cleared this up a bit for me. I can now be confident in what property prices would suit me best.