Understanding NewBuy Mortgage Rates

MercilessKiller

Hi There,

As a first timer in the property world, I'm looking into mortgage rates to find they're hideously complex!

Luckily, I'm pretty mathematical and understand most financial figures such as LTV % which shows what % of the house price the mortgage provider will lend.

However, the information becomes clouded when looking at a NewBuy property as part of the Help 2 Buy scheme so looking for some guidance. For example:
http://www.money.co.uk/mortgages/newbuy-mortgages.htm

We can see Halifax offer quite a few mortgage schemes for NewBuy properties with an attractive 4.3% APR. The confusing part is the LTV % is up to 95%.

From what I understand wih NewBuy, you actually only need to borrow 75% of the house value with a 5% deposit, as the Government provide the other 20% in the form of the equity loan.

Based on this information, lets say I wanted to buy a house for £100k to make it easy, and with Halifax saying the LTV is up to £95,000 for NewBuy properties, and I have a £5,000 (5%) deposit, for the repayment calculation do I say I've borrowed £95k or £75k?

Super confused! Thanks!

kingstreet

No, you're confusing Help To Buy - Equity Loan with NewBuy.

NewBuy is the newbuild version of Help To Buy - Mortgage Guarantee, with both providing 95% mortgages, the former on selected newbuild plots, the other on second-hand properties.

Halfiax has a range of "affordable housing" and "HTB" products for HTB - EL, the HTB - MG products are called "HomeBuyer Special" or something like that.

MercilessKiller

kingstreet wrote: »

No, you're confusing Help To Buy - Equity Loan with NewBuy.

NewBuy is the newbuild version of Help To Buy - Mortgage Guarantee, with both providing 95% mortgages, the former on selected newbuild plots, the other on second-hand properties.

Halfiax has a range of "affordable housing" and "HTB" products for HTB - EL, the HTB - MG products are called "HomeBuyer Special" or something like that.

Aha I knew I was missing something...!!!

So in my example, with a £5k deposit with the quoted scheme, I would be borrowing 95% of the house price and thus paying 4.5% on a £95k mortgage.

So with an equity loan of 20% so that it's a 75% mortgage, do I just look at normal mortgages? I.E can I just take any good mortgage with a 75% LTV and be eligible with an equity loan (as long as the property is a new build and part of the help 2 buy scheme)?

Thanks!

kingstreet

Yes, I'd expect a 95% mortgage on NewBuy to be around 4.5% to 5.0%.

Some lenders allow you to use 75% products on HTB - EL, while others, as mentioned Halifax for example, have a separate range.

Unlike NewBuy, which can be selected plots only, HTB - EL is available on all newbuild properties, as long as the builder is registered.

MercilessKiller

kingstreet wrote: »

Yes, I'd expect a 95% mortgage on NewBuy to be around 4.5% to 5.0%.

Some lenders allow you to use 75% products on HTB - EL, while others, as mentioned Halifax for example, have a separate range.

Unlike NewBuy, which can be selected plots only, HTB - EL is available on all newbuild properties, as long as the builder is registered.

There are a lot of "New home" properites on rightmove but a very small % have the "Help to Buy" red logo on them. I'm assuming that logo only appears for registered builders, thus it makes it look like there's not many...

Is this correct? Or is it correct to assume the builder IS registered and it's actually rare for them not to be?

Sorry for all the questions! I'll look at 75% HTB EL mortgage schemes

Cheers

kingstreet

No idea how Rightmove lists properties.

I suggest you speak to the builder concerned.

MercilessKiller

Ok thanks! It seems that using the mortgage guarantee, you can get a mortgage with 5.5%ish APR for a 5% deposit for the first 2 years and then uses the normal variable one, whereby with the equity loan you can get a 4% for the first 5 years (and then normal variable one) with a 5% deposit + 20% equity loan....

Bearing in mind a property not new is cheaper, I guess they're pretty similar!

kingstreet

... and the equity loan is interest-free for five years, then fees of 1.75% start and these increase each year.

Further, when you repay the equity loan, you can get 20% of the purchase price, but when you repay, you repay 20% of the property value at the time, not just the amount you borrowed.

MercilessKiller

kingstreet wrote: »

... and the equity loan is interest-free for five years, then fees of 1.75% start and these increase each year.

Further, when you repay the equity loan, you can get 20% of the purchase price, but when you repay, you repay 20% of the property value at the time, not just the amount you borrowed.

Yup - Fingers crossed the house market would have boomed even more and I'd sell for a 80% profit and thus not minding the 20% payback

Ok, we can dream..

But on a serious note, as new properties are generally more expensive, in the long term financially it doesn't seem there's much diff between a 95% mortgage on a cheaper older property compared to the equity loan and a 75% mortgage on a new property! In fact that one might be more expensive long term because of the interest on the equity loan...

Lots to think about!! Living in London definitely has its disadvantages