Help to Buy Schemes

jb1989

Are these good or worth doing?

I'm looking at a property which I believe I can afford with the help to buy scheme.

I am unsure if its the right thing to do or if its going to be horrible once the interest starts going up on the 20% lended.

charleyroo

depends how much you're borrowing and how much you can afford!

the one i looked at, at this moment in time interest looks to be about £80 a month - doable for me, not doable for everyone, pennies to others lol.

of course, if you shop around for mortgages yourself make sure you include the interest in your outgoings on the mortgage calculators.

jb1989

But that £80 a month starts after the 5 years?

charleyroo

yes it does. but the banks like to factor it in to your affordability now (i went after a builder SE scheme about a year ago, and got caught out cos id done all my mortgage calculators without the interest charge, and the banks put the brakes on me )

kingstreet

jb1989 wrote: »

Are these good or worth doing?

I'm looking at a property which I believe I can afford with the help to buy scheme.

I am unsure if its the right thing to do or if its going to be horrible once the interest starts going up on the 20% lended.

Are you buying a newbuild?

Newbuild = equity loan.

Non-newbuild = guarantee, no equity loan.

jb1989

Newbuild. Sorry, I didn't see this replay!

kingstreet

Ok. The equity loan fees start at 1.75% from the beginning of year six and increase a little each year. The table on pages 14/15 show you what these might be, assuming inflation of 5% per annum;-

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

Don't forget your exit strategy. When you repay the loan, you can do so in one chunk, or two. However, you repay 20% of the value of the property at the time, not what you borrowed at the outset. Obviously, you could end up paying more, if the value has increased.

You'll find your HCA HomeBuy Agent's details inside the back cover and it's their broker panel you might find useful.

jb1989

Hi again,

Just quickly, sorry for a silly question but after 5 years does the monthly payment begin paying off what was given in the original 20% or are you just paying the interest off and need to pay large chunks off over time?

Daxx

We have just bought a new-build using this scheme.

You are only allowed to get a mortgage from certain lenders if using the equity loan.

The government then loan you 20% of the property value at no charge for the first 5 years. In the 6th year the interest starts.

At any point you can choose to pay of 'chunks' of the loan you have borrowed however this is calculated in % and not monetary value.

So if you pay back the full 20% in the first 5 years you pay no fees. If you pay back 15% in the first 5 years you only pay fees on the remaining 5%. We were advised to save the money and pay off what we could at the end of the 5 years as every time you come to pay some back you need to pay for a property valuation.

The fees you pay will never affect the loan. You need to make additional repayments to 'buy back' the equity in your property.
Hope this makes sense.

jb1989

Daxx wrote: »

We have just bought a new-build using this scheme.

You are only allowed to get a mortgage from certain lenders if using the equity loan.

The government then loan you 20% of the property value at no charge for the first 5 years. In the 6th year the interest starts.

At any point you can choose to pay of 'chunks' of the loan you have borrowed however this is calculated in % and not monetary value.

So if you pay back the full 20% in the first 5 years you pay no fees. If you pay back 15% in the first 5 years you only pay fees on the remaining 5%. We were advised to save the money and pay off what we could at the end of the 5 years as every time you come to pay some back you need to pay for a property valuation.

The fees you pay will never affect the loan. You need to make additional repayments to 'buy back' the equity in your property.
Hope this makes sense.

Thanks so much, thats cleared a lot up for me.

Out of interest if just before the 5 years was up you paid off the full amount that is owed is that the same as what was given to you on day one or would you have to get a valuation before you paid it all off. I.E. If i was able to save exactly what was given in the first place could I just pay it all back at 4 years and 11 months or would I need to get a valuation done then.

kingstreet

You cannot pay off the equity loan in more than two chunks.

You can repay all the 20% at once, or repay in two 10% chunks. There is no mechanism to repay the equity loan more often than that.

http://www.myfirsthome.org.uk/content/1/122/help-to-buy.html

Whenever you repay the loan, it is always a percentage of the value of the property and never what you originally borrowed.

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

Please read the guide.