Help To Buy - Incentives?

Sparx

Hi guys

We're shortly reserving a home with Redrow using the Help To Buy Scheme. Does anyone know (or have experience) with what incentives they are allowed to give?

Carpets, turf, pay stamp duty (1%), pay legal fees, offer £???? limit in extras, etc???

I'm sure I heard somewhere they aren't allowed to do certain cash based incentives.. But would appreciate it if someone could clarify what is allowed and what is not with the mortgage lenders / Help To Buy scheme.

If it helps we may end up getting our mortgage with either NatWest or Halifax.

Thanks

Turnbull2000

Developers are typically removing incentives when it comes to Help to Buy. Buyers are already in receipt of an incentive from the government, after all.

Sparx

Turnbull2000 wrote: »

Developers are typically removing incentives when it comes to Help to Buy. Buyers are already in receipt of an incentive from the government, after all.

While that is nice, it doesn't actually help when developers decide to provide incentives - what are they allowed to offer?

The government will profit insanely from this HTB scheme anyway within 5 years moving forward. They get a 1.75%+ fee after 5 years every year until the Equity Loan is paid off based on the house's current market value! That's how they make their money back from this scheme.. So I'm going to ensure I pay mine off as promptly as possible..

[Deleted User]

Sparx wrote: »

The government will profit insanely from this HTB scheme

Pushing people that can't afford home ownership into home ownership with houses they can't afford that only cost so much because the prices are propped up by the availability of loans that will give pretty much anyone the opportunity to buy a house?

This will be a disaster.

dgtazzman

And now an answer that's actually on topic. Most HTB administrators and lenders allow up to 5% worth of cash incentives (stamp duty, legal fees, etc.). Material incentives, such as carpets etc. are mostly left out of consideration.

Redrow, however, from what's been said around the forums in the last month, isn't very generous when it comes to incentives and many others are rapidly following suit.

Sparx

Thank you dgtazzman. That's all I needed to know.

Much appreciated.

nathand_2

Sparx wrote: »

While that is nice, it doesn't actually help when developers decide to provide incentives - what are they allowed to offer?

The government will profit insanely from this HTB scheme anyway within 5 years moving forward. They get a 1.75%+ fee after 5 years every year until the Equity Loan is paid off based on the house's current market value! That's how they make their money back from this scheme.. So I'm going to ensure I pay mine off as promptly as possible..

1.75% over 5 years is not a massive profit! Every year thereafter at 1.75% is still very small. If you sell your house when the prices have risen but before paying off the loan their profit from the scheme will be far more substantial.

Tancred

Sparx wrote: »

Hi guys

We're shortly reserving a home with Redrow using the Help To Buy Scheme. Does anyone know (or have experience) with what incentives they are allowed to give?

Carpets, turf, pay stamp duty (1%), pay legal fees, offer £???? limit in extras, etc???

I'm sure I heard somewhere they aren't allowed to do certain cash based incentives.. But would appreciate it if someone could clarify what is allowed and what is not with the mortgage lenders / Help To Buy scheme.

If it helps we may end up getting our mortgage with either NatWest or Halifax.

Thanks

Depends on the area. Anywhere in high demand and you won't get any incentives.

kingstreet

Sparx wrote: »

They get a 1.75%+ fee after 5 years every year until the Equity Loan is paid off based on the house's current market value! That's how they make their money back from this scheme.. So I'm going to ensure I pay mine off as promptly as possible..

A fee of 1.75% of the equity loan is payable in year six and that increases each year by RPI + 1%, so that's 1.87% in year seven, 2.0% in year eight and so on, if inflation runs at 5% pa.

It is only based on the actual loan amount given at the outset, it isn't based on property value.

The property value comes into play when you repay. If you repay all the equity loan on sale, you pay 20% of the value at that time, same if you leave it until the end of the mortgage term.

Sparx

citricsquid wrote: »

Pushing people that can't afford home ownership into home ownership with houses they can't afford that only cost so much because the prices are propped up by the availability of loans that will give pretty much anyone the opportunity to buy a house?

This will be a disaster.

Couldn't be any further from the truth. My partner and myself can afford home ownership, we just didn't want to spend 2-5 years at our parents saving up the deposit for so long. With a 5% deposit and 20% equity loan we can still afford to repay them within 25 years (we even plan to overpay!)..

nathand wrote: »

1.75% over 5 years is not a massive profit! Every year thereafter at 1.75% is still very small. If you sell your house when the prices have risen but before paying off the loan their profit from the scheme will be far more substantial.

It is in the grand scheme of things 6th year on wards if you think the amount of people using the scheme. I'm not complaining too much, it's a great scheme that's helping us jump on the ladder sooner than we anticipated while being affordable.

Tancred wrote: »

Depends on the area. Anywhere in high demand and you won't get any incentives.

It's not that highly in demand really - I live in the North East so the market isn't anywhere near as quick and demanding as the South or London.

kingstreet wrote: »

A fee of 1.75% of the equity loan is payable in year six and that increases each year by RPI + 1%, so that's 1.87% in year seven, 2.0% in year eight and so on, if inflation runs at 5% pa.

It is only based on the actual loan amount given at the outset, it isn't based on property value.

The property value comes into play when you repay. If you repay all the equity loan on sale, you pay 20% of the value at that time, same if you leave it until the end of the mortgage term.

Thanks for clarifying this! I read the HTB PDF on their website and I must've mis-understood this. So the annual fee on the equity loan is based on what was initially borrowed. The loan repayment itself when being repaid is based on the "current" market value of the home?

Redrow have already offered us carpets and possibly turf.. We are looking to be cheeky and ask for legal fees and stamp duty to be covered if possible..

[Deleted User]

Sparx wrote: »

Couldn't be any further from the truth. My partner and myself can afford home ownership, we just didn't want to spend 2-5 years at our parents saving up the deposit for so long. With a 5% deposit and 20% equity loan we can still afford to repay them within 25 years (we even plan to overpay!)..

I'm not saying you can't, I don't know your situation, I'm saying that the average person looking at this scheme can't. I know a bunch of people buying houses under this scheme that they cannot afford.

The fact is for a lot of people saving for a deposit teaches good financial habits and financial responsibility, allowing people to skip this part of the process will encourage people to buy into a house without the financial skills required to properly manage a house. Houses are expensive to own, very expensive, the initial deposit cost is just one part of owning a house and people that don't understand that will inevitably have big problems.

There are people that will benefit from this scheme and be perfect candidates for it -- which could be you! -- but most people won't and it will end in disaster.