Help to Buy Issue: Low-Medium Wage, Higher Deposit

kingstreet

The minimum deposit is 5% and the minimum mortgage is 25%, so your deposit can be anything from 5% to 55% and you can still have the 20% equity loan.

It is a loan, not a gift and when it is repaid you repay 20% of the value of the property at that time, not the £ amount you got at the outset.

You won't find this written down anywhere, as I suspect the Government would rather not shout about it. However, if you use the HCA calculator, which we do every day and submit PIFs to the HTB Agents, you know that the basis on which qualification works is;-

4.5 x income maximum
25% minimum mortgage
5% minimum deposit
4.8% mortgage rate
45% debt to household income ratio maximum
mortgage term must expire before age 70.

If anyone wants a copy of the HCA calculator, an Excel spreadsheet, PM me with your email address and I'll send it to you.

Pixie5740

You can use the scheme but I think it's your income of £24k that's going to prohibit you from buying the property you want.

If you get the 20% equity loan and you think your £50k deposit equates to about 20% of the purchase price then you're looking at properties around £250k with a 60% LTV mortgage...? So you would need a £150k mortgage which is 6.25 times your annual salary.

kingstreet

Also worth remembering, you have to take the output from the lower of the two calculators you are using. If the lender's affordability calculator indicates less than the HCA calculator, you need to work from the lender's.

... and vice versa.

You have to enter (typically 3%) the notional cost of the equity loan and any ground rent & service charges in the lender's affordability calculator, in addition to the other requested outgoings.

kingstreet

If you want the calculator, PM me YOUR EMAIL ADDRESS and I can send it to you!

Willem-de-Blois

Pixie5740 wrote: »

You can use the scheme but I think it's your income of £24k that's going to prohibit you from buying the property you want.

If you get the 20% equity loan and you think your £50k deposit equates to about 20% of the purchase price then you're looking at properties around £250k with a 60% LTV mortgage...? So you would need a £150k mortgage which is 6.25 times your annual salary.

Yes I realise this. I was looking at a 2-bedroom property at this price as a guide - or a worked example - on how the Help to Buy schemes might be implemented. A friend said that he would be a lodger for about three years if I got the 2-bed property. The 1-bed property is 215k.


These prices were what made me consider shared-ownership but I am a few percentage points over the 40% affordability threshold that my local HA uses.


So the question is for shared-ownership, is the threshold 40% of net income or 45%?

ethank

You cannot use income from a lodger as income for the purposes of a mortgage

Is there any opportunity for you to increase your earnings?

Red-Squirrel_2

What's your credit score like? There are definitely lenders that will give you more than 80K on your salary as long as its good. Have you looked at the 'how much can I borrow' calculators on the websites?

I earn a bit less than you, but will have about 60K as a 'deposit' for my next purchase, I'm looking at asking prices up to about 130-140K and that's not borrowing up to my limit. I can't imagine why I'd want to be getting involved in any government schemes when I don't absolutely have to.

Do you live alone? If you're living in a city centre, a one bed flat will keep its value more than in other areas, and in a few years you might have a high enough salary and enough equity to move to a 2 bed house the conventional way.

Willem-de-Blois

ethank wrote: »

You cannot use income from a lodger as income for the purposes of a mortgage

Is there any opportunity for you to increase your earnings?

I just got an 8.3% pay rise (although a good development professionally) which only has a marginal effect on what I'd likely be able to borrow.

Any further such pay rises at equal or greater rates will likely happen once I get chartered which is making me wonder if I should invest £700 in unlimited web courses run by my professional body with a view of getting chartered sooner rather than later. As things stand, I won't get chartered until Q4 2016.

I realise that I cannot use lodger income to secure a better mortgage. I'm just weighing up the pros and cons of getting a 2-bedroom flat (versus a 1-bedroom) and having a lodger help with the cash flow.

Willem-de-Blois

Red-Squirrel wrote: »

What's your credit score like? There are definitely lenders that will give you more than 80K on your salary as long as its good. Have you looked at the 'how much can I borrow' calculators on the websites?

I earn a bit less than you, but will have about 60K as a 'deposit' for my next purchase, I'm looking at asking prices up to about 130-140K and that's not borrowing up to my limit. I can't imagine why I'd want to be getting involved in any government schemes when I don't absolutely have to.

Do you live alone? If you're living in a city centre, a one bed flat will keep its value more than in other areas, and in a few years you might have a high enough salary and enough equity to move to a 2 bed house the conventional way.

I haven't checked out my credit score yet.

I am working with an Independent Mortgage Advisor who specialises in shared-ownership. We've decided to do all the mortgage paperwork now before I find a place so I can react quickly if I find somewhere.

I'll join a credit score agency once I have cleared my credit cards that I wrote about here:

https://forums.moneysavingexpert.com/discussion/5210774