Confused about "Help to Buy" scheme

aaz01

I am a bit confused about the "Help to Buy 1" scheme (loan from government). I have a couple of questions...

1) If we used this scheme, with 5% coming from us and 20% from the government, what happens if we want to move in 5 years time? Are we basically in negative equity for the 20%? So we're stuck in that house until we can pay the government back their money - is that right?

2) Can we shop around for mortgages and get a good deal, or are we limited to specific "allowed" mortgage lenders (and if so, how much more expensive are they than the standard ones?)

And what other points are there that we should consider? We're buying in Scotland if it makes a difference.

kingstreet

Possibly. You would have to repay the equity loan on sale, 20% of the value of the property at that time. In £ terms, that would depend on the value of the property.

There are around ten lenders offering HTB - Equity Loan products. As the rates start at around 2.3% for a two year fix, you won't get a better deal without it.

You need to have a planned exit strategy. After five years, the fee payments on the equity loan begin at 1.75%. They rise each year and assuming inflation of 5%pa, will be 1.87% in year seven, 2.0% in year eight and so on.

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

PasturesNew

And there's a fee to apply (I think)

kingstreet

PasturesNew wrote: »

And there's a fee to apply (I think)

Only a reservation fee for the property and that is deducted from the purchase price, on completion.

Our builders don't take the reservation fee until the ATP is issued for the HTB - Equity Loan, reducing the risk of unnecessary cost, despite most of the reservation fee being refundable anyway.