Government help to buy scheme

brit1234

Its best to pay down the element with the highest interest rate what ever part that would be.

ethank

brit1234 wrote: »

Its best to pay down the element with the highest interest rate what ever part that would be.

I disagree. What if the value of the property in five years goes down and you are not able to lend enough to buy back the 20% because there is not sufficient equity in the property. Personally, I'm going to save and attempt to buy back at least a 10% equity share in the next couple of years.

Sparx

And what if the house value increases? Bit of a catch 22..

MoneySaverLog

ethank wrote: »

I disagree. What if the value of the property in five years goes down and you are not able to lend enough to buy back the 20% because there is not sufficient equity in the property. Personally, I'm going to save and attempt to buy back at least a 10% equity share in the next couple of years.

Sparx wrote: »

And what if the house value increases? Bit of a catch 22..

Yes, guess it depends on the view of the market - will house prices increase, decrease or remain the same?

claret_mike

As I understand it, you will pay a premium for buying a new build. If there are similar houses still for sale new, you will be unlikely to make a profit on your home as people would rather buy new if it was the same price or cheaper.

Clearly there will be exceptions to the rule - buying off plan perhaps or in certain areas etc but I would certainly expect a lot of them to drop in price, especially if you are working on a 2 year plan to remortgage etc...

If you come to remortgage in 2 years and it's dropped 10% in value as new build premium was paid etc and you only have 5% equity then you could be struggling.

My personal view would be looking at a min 5 year with this scheme before expecting to remortgage and I would look to ensure there is a realistic chance that you can increase your equity in this period..

I would closely look at the development you are buying and do your planning accordingly.

brit1234

ethank wrote: »

I disagree. What if the value of the property in five years goes down and you are not able to lend enough to buy back the 20% because there is not sufficient equity in the property. Personally, I'm going to save and attempt to buy back at least a 10% equity share in the next couple of years.

Help to buy 1 is a shared equity scheme designed to inflate the price for the builders benefit but you knew that when you bought. Anyone buying a overvalued new build property with a 5% deposit which losses value the second it doesn't become new at near peak of bubble is going to be at far higher rate of negative equity especially as mortgage rates go up.

However on every forum on here no matter if it is loans, credit cards or mortgages the sensible advise each time is to pay off the highest interest one first to save money. In your case it is the most efficient way to create equity.

I personally would of never gone near the scheme as it is a potential 5 year time bomb for those who took up the scheme at a point when mortgage rates are going to be higher. Just look at the people who took shared equity mortgages in 2008 on these forums.

ethank

At least if I have saved the money whether the price goes up or down - I still have the money in the bank.

If I make overpayments - I can only benefit if the house stays at the same value or increases as if it decreases I am unable to take out what I put in.

Whilst you are able to remortgage, the OP was asking about the repayment of the Shared Equity to the HCA. As with HTB it is a condition of the mortgage that you cannot borrow back your overpayments or obtain further lending on the property until HCA are repaid, then if the value goes down significantly, you could be stuck being unable to use your mortgage to staircase.

My view of the market, I think that I've seen a massive change this year, but on some developments I have been to, there are 10 houses sitting empty! I think the value going up or down will really depend on the development, how popular it is, and the deal you were able to get on purchasing it.

Brit1234 - You are generalising. You have no idea what people are paying for the houses, what discounts are being offered, and what deposit they are putting down. I bought my house 11k cheaper than someone next door who did not use Help to Buy, and 30k cheaper than what the same house is being marketed on the other phases.

HTB in my opinion is the same as buying a house through an estate agent - if you approach this with head, not heart, plan and do a lot of research, and know your numbers - you are less likely to be taken advantage of.