Govt Help to Buy Scheme - Why the high prices

thedalmeny

gibs83 wrote: »

thats sort of my thinking around it regarding interest rates that are offered.

I was also thinking if the housing market did crash again in a few year, the amount I would owe the govt loan would be less (as its 20% of the current market value that you pay back at the time) so that would be a good time to pay the loan off.

I can't see house prices going down for a long time, certainly not to the point where negative equity is achieved.

From a previous post i did, this is what i got in terms of rate against one of the best rates on the open market at the time of buying;

What i got on Help To Buy;

- 3.59% 2 year fixed
- Stamp Duty Paid by mortgage company
- No arrangement fee
- £694.37 per month repayment
- £14844.88 total cost over 24 months.

Yorkshire building Society has the best mortgage rates i could find over fixed term, requires a 65% LTV.

- 1.66% 2 year fixed
- £975 arrangement fee
- Stand duty to be paid by buyer
- £557.58 per month repayment
- £14356.92 total cost over 24 months.

Basically, Help To Buy was only £487.96 more over the fixed rate term compared to the best possible mortgage on the market (That i could see) at 65% LTV.

For me? It was a no brainier.

I admit though, it was lucky Halifax were doing a temp offer of stamp duty paid for first time buyers at the time.

blinko

with this help to buy, is there any way to avoid the government interest rate kicking in after 5 years without selling the property

kingstreet

Yes. You can pay off the equity loan by money from your own resources, or by further advance or remortgaging if you have sufficient equity.

gibs83

blinko wrote: »

with this help to buy, is there any way to avoid the government interest rate kicking in after 5 years without selling the property

Save for 5 yr to pay it off at the end, or add it to your mortgage (if possible) or just start paying the interest in addition to your mortgage payment. You don't HAVE to pay it off after 5 years.

CLAPTON

blinko wrote: »

with this help to buy, is there any way to avoid the government interest rate kicking in after 5 years without selling the property

it's not an interest rate, it's a fee

blinko

CLAPTON wrote: »

it's not an interest rate, it's a fee

so each year they charge 1.75%+RPI

Also when it is to be paid off am I right in assuming that this would not be at the price the house was paid for, it would be at the market value of the property at the time of paying off the H2B 2 scheme

kingstreet

The fee is 1.75% in year six.

Each year it rises at RPI + 1%, so if inflation runs at 5% per annum, in year seven it will be 1.87%, in year eight 2.0% and so on.

I suggest you read the guide here;-

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