First time buyer.... Help!!

Ali-P_3

Hello everyone,

I am a first time buyer and a bit on the green side when it comes to mortgages so thought I would come on here for a bit of advice?

I am finally in a situation to buy my own home, but I am unsure wether to go down the road of the governments new right to buy scheme and pay the higher interest rate or go down the conventional path of putting down a 10% deposit and getting a lower interest rate?

I am looking At houses in the region of £90,000 - £120,000 I,would prefer to be at the bottom end of that scale but I am prepared to pay the extra for the right house.

Any help would be gratefully received.

Ali

ACG

The more i read about this help to buy scheme the less i like it.

I dont know your circumstances but personally i would go down the route of putting down the 10% deposit if that is an option.

kingstreet

Why would anyone use HTB - MG if they have 10% deposit?

There is no benefit to them and the rates are higher.

Ali-P_3

kingstreet wrote: »

Why would anyone use HTB - MG if they have 10% deposit?

There is no benefit to them and the rates are higher.

That's why I'm asking

amnblog

It's all about the mortgage costs Ali. Whether the mortgage is covered under the Help to Buy guarantee scheme makes no difference to you.

You just need a good rate when the time comes.

aleandra

ACG wrote: »

The more i read about this help to buy scheme the less i like it.

Hi, is there any reason for not liking it? I'm not an expert but to me it seems really flexibile - no restrictions on the new build vs existing, you don't need to be a first time buyer, it has to be residential and not investment etc. The only drawback is the interest rate, but at just under 5% for a 95% LTV it doesn't seem that bad. Am I missing something here? I'm asking because a friend of mine is really interested in using it - high salary, excellent credit rating, but low savings - and he's also suspicious of it just because 'it's one of those shady govt schemes'.

ACG

I do stand to be corrected here but in 5 years you then have to make interest only payments on the 20% stake.
In order to pay it off you can only do that by paying off lump sums - rather than say if you have £50 here and there spare.

If your property goes up in value then so does the amount you owe the govt meaning your not getting the full benefit of any increase in value.

The interest rate chargeable on the equity loan is quite high and its linked to RPI rather than say the bank of england base rate.

I was also speaking to a mortgage advisor at RBS this morning and for affordability purposes, you are checked based on an interest rate of 7% - not necessarily a bad thing in itself, but if your expected payrises in the future they wont help now.

I just think there is a lot more to this than "you only need a 5% deposit". If people genuinely sat down and thought about it without getting caught up in the hype would they do it? Personally i would be very reluctant to do it as i cant see people being able to pay off the loan until they sell the house.

Just my opinion so far but i do need to do a lot more reading up on it.

aleandra

@ACG: sorry I don't understand when you say 'the amount you owe the govt', and also which 20% stake are you referring to? Are you talking about Help to Buy equity loans?

I'm under the impression that the OP is talking about the Help to Buy Mortgage Guarantee scheme, which was launched two days ago, where you need a 5% deposit and take a 95% mortgage?

ACG

https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-equity-loans

Customer puts down 5%
Govt put up 20%
Mortgage for the remaining 75%

Have a read of the link above.

If you have a 5% deposit and a 95% mortgage... there is no need for help to buy as you have got to the full 100% of the purchase price.

aleandra

There's another scheme for Help to Buy that was supposed to be launched in 2014 but it was made available two days ago. "Help to Buy: mortgage guarantee." Different than the equity loans you're mentioning.

I can't post links but it's on the same website you posted, click on chapter 5.

ACG

https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-mortgage-guarantees

Thats the link for anyone else.

I did say im not too great on these schemes. Theres a member on here who will hopefully come on and give the right info.

I need to do some more reading up i think!