Eligible for help to buy?

sammy28

Hi everyone,

Looking for some advice please. I am interested in the help to buy scheme. I read somewhere that you can either save a 5 or 10 % deposit and then you are able to get a 20% interest free loan from the government. The remaining 80% you get a mortgage for or from your own funds.

I have £70000 savings at the moment. The property price is £230,000. So if I put down £23,000 for a deposit and the government gives me a £46,000 loan then theres £161,000 left from the £230,000. I would have £47,000 left out of my savings if I take of the deposit of £23000. Does this mean I need to get a mortgage for the full £161,000 or can I get a mortgage of £114,000 if I take of my savings of £47,000. Hope that makes sense. Any advice would be appreciated.

ViolaLass

The loan is interest-free for only five years, it's for new-builds only (and not all of them) and it will limit your choice of lenders.

Why would you want to use it when you don't need to?

sammy28

The home I want to buy is a new build. It's £230,000 and I have savings of £70,000. I couldn't afford a mortgage of £160,000. That's why I thought help to buy would be good for me?

kingstreet

As VL said, HTB - Equity Loan is newbuild only.

HTB - Mortgage Guarantee is for second-hand property but works completely differently.

HTB - EL = You can have an equity loan of either 10% or 20% of the purchase price and you must borrow at least 25% of the purchase price by mortgage.

It's interest-free for five years and "fees" start in year six at 1.75% pa increasing each year.

You can repay the loan in upto two equal chunks, but when you do, you repay the percentage of the property value at that time. For example if you get 20% of the purchase price, you repay 20% of the property value at the time of repayment.

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

kingstreet

sammy28 wrote: »

The home I want to buy is a new build. It's £230,000 and I have savings of £70,000. I couldn't afford a mortgage of £160,000. That's why I thought help to buy would be good for me?

Lenders factor-in 3% of the equity loan into affordability, so if you can't afford a £160k mortgage, chances are you will not be able to afford a HTB - EL purchase with a £46k equity loan where £115 per month will be added to your monthly outgoings.

If you are not caught out by the lender's affordability calculator, you may well be caught out by the HCA calculator which uses 4.5x income, 45% debt to income and a mortgage rate of 4.8% per annum to calculate affordability.