New Buy 5% Deposit Question

wrkactjob

Is the 5% deposit you need to have 5% of the total cost prior to the government taking 20% off or 5% after the 20% has been taken off?

I read in the Daily Mail recently some lenders were lending on the basis of 5% after the 20 had been taken off?

ethank

I thought NewBuy was over now. If you are on about Help to Buy, you don't do either - if the house value was £200k, you would need a £10k deposit and get a £40k equity loan from the Government. Check out https://www.helptobuy.org.uk

kingstreet

You are confusing NewBuy with Help To Buy - Equity Loan.

NewBuy is a 95% mortgage product.

HTB - EL is the 20% loan with min 5% deposit. It's 5% of the purchase price, not 5% of the equity share.

wrkactjob

kingstreet wrote: »

You are confusing NewBuy with Help To Buy - Equity Loan.

NewBuy is a 95% mortgage product.

HTB - EL is the 20% loan with min 5% deposit. It's 5% of the purchase price, not 5% of the equity share.

Yes thanks..quite confused..it was this link I saw

http://www.dailymail.co.uk/news/article-2624792/Loophole-let-borrowers-dodge-Help-Buy-loan-limit-Hundreds-cash-strapped-home-seekers-able-borrow-huge-sums.html

As your only applying for a 75% mortgage presumably this will help keep your monthly payments down but are these mortgages more easy to get than the 95% ones as the risk to the lender is reduced?

I'm reading here you don't need to pay the 20% back until you move or until 25 years?

If a new house cost £300,000 would a lender be judging you on the affordability of the 75% mortgage for which you are applying (on the basis of a 5% deposit and 20% equity loan) or the full 300K?....most mortgage calculators I have used would give me and my wife about £250,000 which would more than cover a 75% mortgage application but would not stretch to the full 300.

kingstreet

Remember HTB - Equity Loan is newbuild only.

You start to make "interest" payments on the equity loan in year six and these increase each year.

When you pay off the loan, on sale,voluntarily or after 25 years, you repay 20% of the property value at that time, if you get a 20% loan to purchase. Therefore you will pay more if your property value has increased.

HTB Guide here;-

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

Lenders usually take 3% of the equity loan as a deduction from your borrowing power, so factor that into affordability, along with any ground rent and service charges if it's a flat or leasehold house.

Easier to get is relative and depends on circumstances and credit score.

wrkactjob

Thanks will PM you.

kingstreet

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