Help to Buy Scheme - specific mortgage product needed?

macaulays

Evening,
Just looking through some of the details of the HtB scheme and one thing I can't figure out is whether you need to apply for a specific HtB mortgage product (like NewBuy) or if you just look at any standard product at the post-equity loan LTV which, for most people, looks to be 75% - can anyone advise?

If it is a specific product that you need, can anyone point me in the direction of lenders that do this?

Lastly, having read through the pack from HCA, they mention something about making some sort of affordability calculation to see if you would be able to receive the full 20% equity loan or whether they might offer you less than this if they feel you can afford it. Does anyone know how this is worked out? Is it a formula of some sort or is a case-by-case and dependent on the person that happens to be processing your app? If they say that they will not permit the full 20% then does the remainder have to be made up with a higher deposit or a higher LTV mortgage or do they not mind?

Thanks for any pointers folks,

Sandy

ging84

I am assuming you are looking at the current help to buy equity loan for new builds and not the mortgage guaranty starting next year. If you are looking at the mortgage guaranty scheme for next year, none of this applies, it's a very different scheme involving no loan.

The help to buy mortgage are specific products from the lenders, you cannot simply claim to have an extra 20% equity in the property, because you don't the equity loan is secured against it.
there is a list of a few lenders on this article
http://www.thisismoney.co.uk/money/mortgageshome/article-2390051/Help-Buy-mortgage-2-99--dont-forget-fees.html
but it is probably best to go through a broker

as for the affordability calculation, there is a formula, it is something like 4.5x your income minus something for the amount of debts you have.
It's not necessarily that important, as unless the lender is prepared to offer you more than this affordability calculation they will base it on what the maximum the lender will lend you is.
So even if the calculation says you can afford more than 80% with your deposit, but the lender will only lend you enough to buy 80% then you would get the full 20% loan.

If it works out they will not give you a full 20% help to buy loan this will be because you can afford the larger mortgage than someone who would need the full 20%, if you try and add more of a deposit this will simply reduce the amount you can borrow from the scheme rather than the amount you need to borrow from the bank. You should in theory be declaring your full deposit to start with anyway.

You could potentially make a large over payment at the start of the mortgage, however there may be limits to how much you can initially over pay if you can at all, and this would not normally reduce your monthly payments, but rather shorten your mortgage term

kingstreet

The HTB Calculator is an excel file.

PM me your email address and I'll send you a copy.

Some lenders have special HTB products, others tag them "Affordable Housing" while lastly, some simply allocate their 75% products, Nationwide being an example of this, where you use the FTB, Existing Borrower, or HomeMover product as appropriate.

joe134

ging84 wrote: »

I am assuming you are looking at the current help to buy equity loan for new builds and not the mortgage guaranty starting next year. If you are looking at the mortgage guaranty scheme for next year, none of this applies, it's a very different scheme involving no loan.

The help to buy mortgage are specific products from the lenders, you cannot simply claim to have an extra 20% equity in the property, because you don't the equity loan is secured against it.
there is a list of a few lenders on this article
http://www.thisismoney.co.uk/money/mortgageshome/article-2390051/Help-Buy-mortgage-2-99--dont-forget-fees.html
but it is probably best to go through a broker

as for the affordability calculation, there is a formula, it is something like 4.5x your income minus something for the amount of debts you have.
It's not necessarily that important, as unless the lender is prepared to offer you more than this affordability calculation they will base it on what the maximum the lender will lend you is.
So even if the calculation says you can afford more than 80% with your deposit, but the lender will only lend you enough to buy 80% then you would get the full 20% loan.

If it works out they will not give you a full 20% help to buy loan this will be because you can afford the larger mortgage than someone who would need the full 20%, if you try and add more of a deposit this will simply reduce the amount you can borrow from the scheme rather than the amount you need to borrow from the bank. You should in theory be declaring your full deposit to start with anyway.

You could potentially make a large over payment at the start of the mortgage, however there may be limits to how much you can initially over pay if you can at all, and this would not normally reduce your monthly payments, but rather shorten your mortgage term

Hi, Why would anyone who can afford it, borrow the full 20% off the Gov, and overpay thier mortgage(if allowed) when the idea is that the 20% loan was designed to be paid back at 10% increments, OR, incur 1.75%+ charges after 5 years.
Where,s the logic? If one cannot afford more than 5% deposit, how are they going to staircase £40k in 5 years, £8k a year, on top of mortgage , it,s a recipe for disaster unless sure of a windfall or large increase in income over the next 5 years;
Don,t borrow the full 20%, or repay it during first interest free 5 years(.Staircase it,) to own outright after 5 years, what everyone wants????.
I,m looking into this for Grandson,same as OP, as my grandsons friend has a £200K house ,5% deposit, £40k Gov loan,and a fixed £700 pcm ( low)on a £150k mortgage, so he is thinking of same, but waiting till what januarys scheme brings;Same wages and circumstances.
What,s gonna happen, is , most, people won,t/ cannot, staircase, then after 5 years, incur the second mortgage charges, on top of a rise in first one( and increase) and then struggle to make ends meet, something I couldn,t reccomend to my Grandson, but, the estate agents etc, only too willing to push.They only see the small increase from rent to buy for 5 years, BUT, don,t look at what CAN happen after 5 years are up.
The advisor just told him to change Mortgage providers after 5 years, (assuming new house wasn,t overpriced to start with)???
tread with caution;do your homework

kingstreet

joe134 wrote: »

the 20% loan was designed to be paid back at 10% increments

You've misread the guide.

It's 10% of the property value, not 10% of the loan.

If you only get a 10% equity loan, you repay it in one lump, a 20% loan in one, or two.

This follows the shared ownership "staircasing model" which was adopted for HTB as well.

http://www.myfirsthome.org.uk/content/1/124/staircasing.html

joe134

kingstreet wrote: »

You've misread the guide.

It's 10% of the property value, not 10% of the loan.

If you only get a 10% equity loan, you repay it in one lump, a 20% loan in one, or two.

This follows the shared ownership "staircasing model" which was adopted for HTB as well.

http://www.myfirsthome.org.uk/content/1/124/staircasing.html

Yes, I did misread the equity repayment, but, in the way you have pointed out to me, that,s an even worse case scenario, who,s gonna get the lump sums to repay the 20% equity back, withing 5 years interest free grace, or pay the extra second lot of inerest,1.75%+ on top of the first mortgage.
Not many I presume;
as in my Grandsons friends case, £20k, and £20k=£40k, =20%.
Everyone case is different, but, the object of the exercise, was that, the 20% equity loan should be repayed withing the 5 year interest free period.( if possible) or later, but incurring interest, and the longer it goes the harder it gets, when , interest rates rise.as they will.What,s the difference of Januarys scheme, if it comes?
Just reread your link, and property value;?
+ costs.
I cannot see how this scheme can do anything but stoke up a larger problem for first time buyers, and resulting in them not being able to repay at some stage.

macaulays

Thanks folks. Anyone any further ideas on if it is possible to find out whether one would be eligible for the 20% or 10% equity loan?

macaulays

Also, does anyone happen to know if there are any offset products compatible with Help to Buy by any chance?

Thanks!

kingstreet

None that I know of, but TBH it'd not something I've ever been asked for, so I've never delved deeply.