Help to Buy Equity Loan

Audiman7

Looking at hopefully doing this if its possible. Just wondered do you have to take the mortgage over 25 years or can it be longer?

I understand the equity loan would be max 25 years. But we would like to take the mortgage over 35 years. I'am 32 and my partner is 37.

Reason being it would really make it more affordable for the next few years as my partner will only be working part time till our son starts school.

Then the plan is to hopefully remortgage and pay of the equity loan when she goes back to work full time.

The situation is I currently own my house outright, it's worth about £105k. I understand this needs to be sold before completing on the new build. But do I have to put my house on the market before I get the authority to proceed from the homebuy agent?

We have £12k with loans and CC's currently, but these will be paid off straight away when the house is sold. But does that affect affordability even if they are to paid off before the mortgage starts?

The new build house is £220k, then we'll hopefully sell mine for minimum £100k. Then use £20k of that to clear debts and to pay for all fees etc. and some extras for the house

Which would leave £80k deposit, with £44k equity loan and mortgage of around £96k. Then hopefully get some incentives from the builder for fixtures and fittings.

Our joint annual income, using my partners salary when she returns to work from maternity leave, is as follows:

Basic salary - £18000
Reg overtime - £3000
Tax credits - £4900 (Although this will go down next April)
Child benefit - £1055
Industrial Injuries Benefit - £3360 (This is for life)

The plan is if benefits go down too much or stop my partner will increase her hours to compensate. As we have both have parents who can child mind and don't want money for this.

Before we go over to the development and get our hopes up would anyone be able to tell me if this is do-able?

Thanks in advance

kingstreet

You can have a mortgage for more than 25 years.

If you PM me your email address, I'll email you the HTB Affordability Calculator (an Excel file).

The ATP from the HCA HomeBuy Agent lasts for six months from exchange of contracts and your builder is going to want a 28 day exchange.

If you don't have a buyer for yours, that's going to make life very difficult.

Audiman7

Ok so I should ideally have a buyer for my home before reserving the property with the developer?

Thank you for the help

kingstreet

Yes.

If you need to sell the property and intend to use the proceeds in the purchase of your new home, there seems to be no alternative.

NB Part exchange is specifically prohibited under Help To Buy, but Assisted Purchase is permitted.

Audiman7

Assisted purchase I assume is where they market the house for you and pay estate agent fees etc.?

Also is it correct they're only allowed to offer up to 5% in incentives, so around £11k on a £220k?

kingstreet

AP benefits vary from one builder to another.

Cash incentives are allowed upto 5% by some lenders, but not by others. That's less about HTB and more about the mortgage.

We had a case where Principality took the value as £155k instead of £158k because there was £3k of incentives.

The "CML form" given to the surveyor by the builder confirms the incentives, but the choice of lender determines the lender's attitude to them.

Audiman7

Ok thank you, that's very helpful.

We're thinking of going with either Halifax or Santander.

GJDB

Thanks for posting this Audiman7 as it answers some of the questions I have about the Help to Buy Equity scheme.

Did you find out any further information about whether it is acceptable to use some of the equity from the first house to pay down debts and how they affect affordability?

kingstreet

You can use your equity from the sale of your property as you see fit.

As long as you meet the HTB calculator requirements and your lender is happy to lend the amount you require, you will have no problem.

Audiman7

Having done the HTB calculator our income multiple is 3.95 and the debt to income ratio is 29%. This is without including the £12k debt that will be cleared immediately after we receive the money from the sale of my house.

If I have to include the debt, then the income multiple is 4.84 and the debt to income ratio is 36%.

So if your not allowed to exclude debt that won't exist after completion it looks like we may struggle to get accepted for this.

kingstreet

You are.

You only enter commitments which will continue after completion.