Help to buy - Less than 75% LTV

Miloudilou

Hi all
I am looking at buying a new build through the help to buy scheme.

My partner and I can only borrow a max of approx. £163,000 (quote from Natwest) we would like to buy a house for £230,000. Without the help to buy we would have to put a £67,000 deposit down.

Documentation on the scheme always mention a 75% LTV mortgage. 5% deposit plus 20% loan. However I have seen that you can put more than 5% but then a mortgage broker told me today that you couldn't, 75% LTV was the max. :mad:

My question is can you put more than 5%, does it mean that the government loan gets lower than 20% ? If you can put more than 5% what is the mininum LTV for a Help to Buy mortgage?

Thank you !

Beckyy

Miloudilou wrote: »

However I have seen that you can put more than 5% but then a mortgage broker told me today that you couldn't, 75% LTV was the max. :mad:

75% LTV is the maximum LTV. If you contributed more than a 5% deposit then you would need a lower LTV.

If you find a property from a builder that is part of the scheme and have more than a 5% deposit then your LTV will decrease accordingly. For example a 10% deposit would mean with the 20% government loan you could only need a 70% LTV.

With so few Help To Buy products on the market I wouldn't bother going through a broker, but if you do then I would go to a different one who can answer your questions!

ethank

You can either receive a 10% or 20% loan contribution from Help to Buy.

If you have more than a 5% equity or deposit and could stretch to say 10% - it may be better to negotiate with the house builder than to use Help to Buy. Most builders will offer 5% gifted builders deposits meaning you would be 85% LTV - which is the minimum LTV for new builds at the moment.

You would not have the risk of your loan equity increasing in the future, and should be easier to remortgage, so may be an idea for you to consider.

kingstreet

I'm just doing a case with;-

£175,000 purchase price
£35,000 HTB Equity Loan
£75,000 deposit (gift)
_______

£65,000 mortgage. This is the maximum possible borrowing.

It's about your income, not your deposit. As long as you are borrowing at least 25% of the price of the property and your affordability is okay, you will be fine on HTB - EL with a bigger deposit.

jacobtheamish

If you are buying from a developer, I would strongly advise going through a broker who is capable of getting a mortgage offer out in line with the typical 28 day deadline. Fee Free of course :-)

Miloudilou

Thanks a lot that's really helpful. :T

I have to say mortgage advisers are CLUELESS about this scheme.

So I can have:
Purchase price £231,500
20 % gov loan: £46300
deposit £58,000

HOwever, can somebody confirm that:
1/ you can't then buy another house while you are on a help to buy mortgage
2/ the government takes 5% of any increase in purchase price when you repay the loan in the first 5 years. (I am not sure how to phrase this...)


The situation is: I have inherited a flat, which, to complicate matters further is in France.... I am trying to sell it, found a buyer, the sale is going through and I am hopeful that it is going to complete by end December.

I am however quite scared that if I choose not to go for Help to Buy, if the sale doesnt' go through, I don't have the sale money to pay for the deposit.

Question 1 : can you later choose to go for help to buy, i.e. the house is released 1 November with completion date of April/May 2014, you pay your reservation fee on the house, apply for mortgage, get an offer in principle etc, BUT it's December and the sale of the flat in France doesn't go through, can I then "fall back on the Help to buy"? and go through Help to Buy process ?


Question 2 Can you on the HTB then buy another house (Buy to let) .. if you can't would it be clever to set up a company which you could use to buy another house on buy to let ?

Question 3: Does the government take 5% of any increase of the purchase price when you repay the loan in the first 5 years.


Question 4 (because you haven't had enough of me yet ... The Developer (Taylor Wimpey) told us that there was no incentive possible at all on HTB, no carpet or anything given for free... because "lenders don't allow it" ... (I think that's a lot of !!!!!!!! since I saw other developpers have a max of 5% incentive on HTB) ...


Thank you so much for your answers !

kingstreet

1 You cannot own another property when you exercise the HTB. If you want to buy another property while holding an HTB Equity Loan, you must repay the equity loan.

2 No. If you get a 20% equity loan, you repay 20% of the current value of the property at the time of sale, at any point up to the end of the term.

3 You pay a fee of 1.75% of the loan beginning in year six and this increases each year until the loan is repaid. If inflation is 5% pa, it would be 1.75% in year six, 1.87% in year seven, 2.0% in year eight and so on.

1 No. You apply for HTB when you reserve. You will be expected to exchange contracts in 28 days. This does not facilitate applying for HTB later and you would derive no advantage from doing so. The other property must be sold by completion, not be exchange, so you have until April 2014 to complete the sale.

2 No. Already answered.

3 No. It takes 20% of the value of the property at the time of repayment, or 20% of the sale price, on sale.

4 Some lenders allow incentives. Some don't. However, if the builder does not wish to offer incentives, it's take it or leave it and the lender position is irrelevant.

You may find the HCA's HTB - Buyer's Guide useful, as would speaking to a whole market broker experienced in newbuild;-

http://www.homesandcommunities.co.uk/sites/default/files/our-work/help_to_buy_buyers_guide_sept_2013.pdf