Help to Buy scheme

BartyBoy

Hi All

I am currently in a process of purchasing a brand new house through the Help to Buy scheme. I just wonder if any of you has experienced any problems or issues with this scheme?

The reason I asked the question is because I thought the whole thing was very simple and straightforward as it sounds, but it turns out it isn't.

I always thought, under this scheme, all I needed was 5% deposit and a lender who is willing to provide me a 75% mortgage, then I would be able to get a 20% loan from the government.

I submitted my form to my local Help to Buy office/agency. After some days of waiting, I got a reply from the office saying my application was rejected. The reason for that was because the office did not think I will be able to afford my mortgage. I was absolutely speechless.

What I don't understand is, I have found a high street bank which has done a credit search on me and checked my salary, the bank is happy to provide me a 75% mortgage, so in that theory everything should be OK and I should be able to get the 20% government's loan. But now my application is turned down by the Help to Buy office, I feel very disappointed and confused here.

I appreciate it is part of the procedure for the Help to Buy office to do their own checks and stuff, but I would expect that sort of procedure would have been mentioned somewhere on their website (or have I missed it?). So to me, the whole thing of the Help to Buy scheme is not as simple as it looks.

The next problem I am facing now is, after I have found a bank to lend me the money, I put down a deposit for a new house, I have also hired a financial advisor and a solicitor to proceed the purchase. It means if I cannot get this 20% government's loan, the purchase will fall through and I will lose £2.5K here.

I really don't know what to do next…

Any help, suggestions, or advice is very much appreciated.

Thank you so so much in advance!

andywalker2005

The next problem I am facing now is, after I have found a bank to lend me the money, I put down a deposit for a new house, I have also hired a financial advisor and a solicitor to proceed the purchase. It means if I cannot get this 20% government's loan, the purchase will fall through and I will lose £2.5K here.

If the deals falls through then you shouldn't loose the whole £2.5K . it should only be part of it. (though its all depends on the deposit contract)

andywalker2005

Another thing is that on the helptobuy website there are banks listed who runs help to buy scheme. You can contact them directly (or appoint independent financial adviser or mortgage broker) to do the mortgage application.

BartyBoy

andywalker2005 wrote: »

If the deals falls through then you shouldn't loose the whole £2.5K . it should only be part of it. (though its all depends on the deposit contract)

Thank you for the advice...

justcat

Help to Buy use a different affordability calculator to mortgage companies. They take into account things like loans and credit cards. They will want to see an income to debt ratio of no more than 45%.

The calculator is here http://www.plumlife.co.uk/Finding%20a%20Home/how_do_I_buy/Documents/help_to_buy_equity_loan_affordability_calculator_apr_2013_v3.xls so you can check it out yourself if you want.

if you are using HTB and get declined, you can get your deposit back from the builder. You should have paid no more than £500.

I've been through the HTB application and ran the number and it was fine so it was accepted.

BartyBoy

justcat wrote: »

Help to Buy use a different affordability calculator to mortgage companies. They take into account things like loans and credit cards. They will want to see an income to debt ratio of no more than 45%.

The calculator is here http://www.plumlife.co.uk/Finding%20a%20Home/how_do_I_buy/Documents/help_to_buy_equity_loan_affordability_calculator_apr_2013_v3.xls so you can check it out yourself if you want.

if you are using HTB and get declined, you can get your deposit back from the builder. You should have paid no more than £500.

I've been through the HTB application and ran the number and it was fine so it was accepted.

That is a very good advice, I feel much better now, thank you!

kingstreet

Whoever prepared and submitted your PIF & Reservation to the HTB Agent should have ensured both the HTB AC and the lender AC covered the amounts you needed.

It is not as simple as you suggest, that if a lender will give you a 75% mortgage off you go.

The HTB AC uses;-

no more than 4.5 x income
takes only 50% of variable earnings into account
takes some state benefits into account, not others
a debt to income cap of 45%
a mortgage rate of 4.8%.

I suggest you establish the problem and submit a new PIF.

The term of the mortgage impacts affordability, so if you need to extend the mortgage term (you can go to 70 if you choose that as your anticipated retirement age.)

BartyBoy

kingstreet wrote: »

Whoever prepared and submitted your PIF & Reservation to the HTB Agent should have ensured both the HTB AC and the lender AC covered the amounts you needed.

It is not as simple as you suggest, that if a lender will give you a 75% mortgage off you go.

The HTB AC uses;-

no more than 4.5 x income
takes only 50% of variable earnings into account
takes some state benefits into account, not others
a debt to income cap of 45%
a mortgage rate of 4.8%.

I suggest you establish the problem and submit a new PIF.

The term of the mortgage impacts affordability, so if you need to extend the mortgage term (you can go to 70 if you choose that as your anticipated retirement age.)

Thank you, this is really useful to me, and I agree that the person who submitted my application should have seen the issue.

Besides, I also noticed the HTB office has made a comment on my application form that the completion date was not matching to the builder's reservation form. Fair enough I wrote the date wrong but I would have expected the form was checked before being submitted to the HTB office on my behalf...

kingstreet

The reservation and PIF have to match exactly.

If the build end date is April 2015 and legal completion date May 2015, both those dates have to match on the PIF.

TBH we took these away from our builders and we produce a typewritten PIF we get signed and we send the PIF & Res to the HTB Agent with a copy of the HTB AC output, so we can demonstrate it meets their requirements.

BartyBoy

I must say, when I put a deposit down for my house, the developer did warn me that all info on both forms must match each other. Furthermore, the developer also advised me to use a mortgage broker who has done the HTB application before. But when I asked my broker if he has ever done this application before, he simply did not answer my question. I should have guessed that it is his very first time to do the HTB application - seeing the issue and errors. *sigh*