Which Help to Buy Scheme?

katiejc

Hi

My boyfriend and I are looking to buy a house on the Help to Buy scheme, but we're not sure which one (i.e equity loan or mortgage guarantee).

So far these are the pros/cons of each:

Mortgage Guarantee

Pros - nothing to pay back at the end, available on new and preowned homes, more homes on the market for this scheme.

Cons - higher monthly payments, chance of there being a long upper chain.

Equity

Pros - new home, no upper chain, lower monthly payments.

Cons - 20% of the home's value to pay back when it is sold, interest increases on the 6th year, less homes on the market for this scheme.

Am I missing any vital info, or is this all correct? We're both 20 y/o, working full time with a combined income of over £40,000. Can anyone provide your experiences and opinions on the two schemes?

Thank you!

Gordon_Hose

We used Mortgage Guarantee and pay slightly more. The thought of having to pay 20% back after 5 years put us off.

katiejc

Gordon_Hose wrote: »

We used Mortgage Guarantee and pay slightly more. The thought of having to pay 20% back after 5 years put us off.

Thanks for your reply. We're looking at a 2 bed flat priced at around £180,000. Countrywide have said we'll be paying around £800 a month for that (based on a 5% deposit), is this accurate?

stator

katiejc wrote: »

Thanks for your reply. We're looking at a 2 bed flat priced at around £180,000. Countrywide have said we'll be paying around £800 a month for that (based on a 5% deposit), is this accurate?

I would estimate it at £900pcm 30 year mortgage but why not just use an online calculator and find out

Personally I'm aiming for the MG scheme, it seems simpler and less chance of negative equity or other problems. You won't be stuck on the SVR with a limited number of lenders. When your LTV is down to 90% you should be able to remortgage with anyone.

katiejc

stator wrote: »

I would estimate it at £900pcm 30 year mortgage but why not just use an online calculator and find out

Personally I'm aiming for the MG scheme, it seems simpler and less chance of negative equity or other problems. You won't be stuck on the SVR with a limited number of lenders. When your LTV is down to 90% you should be able to remortgage with anyone.

Wow - £900 pcm is pricey!

stalkah

We've gone for the EL scheme as gives the ability to afford a bigger(needed) house still using 5% deposit with better rates (75% LTV mortgage instead of 95%)


We're making sure we budget to save around £500 a month this will allow us to clear a fair chunk of the EL at the end of the interest free period and even if we don't clear it all the rates on the remaining will only be 1.75% in the first year which is cheaper than most loans/mortgage rates currently

katiejc

stalkah wrote: »

We've gone for the EL scheme as gives the ability to afford a bigger(needed) house still using 5% deposit with better rates (75% LTV mortgage instead of 95%)


We're making sure we budget to save around £500 a month this will allow us to clear a fair chunk of the EL at the end of the interest free period and even if we don't clear it all the rates on the remaining will only be 1.75% in the first year which is cheaper than most loans/mortgage rates currently

Hmm that's interesting, I didn't think of it like that. We are looking at a £44,000 HTB EL, and if we save around £300 pcm we'll have saved £18,000 in 5 years, so would only need £26,000 from what we make on the house. BUT, I don't know how the price of the house would fluctuate. If it drastically increases, of course we'll owe a lot more than £44,000, but if it decreases, we might find ourselves in negative equity. It's a tough decision.

stalkah

Just a raw search using Nationwide as an example,


If you're looking at houses worth £220k with the EL over 30 years on a 3 year fixed you'd be looking at £655.38 a month


Using the MG you'd be looking at £1,076.42


so either you'd need to find a much cheaper home or pay higher mortgage payments

Gordon_Hose

katiejc wrote: »

Thanks for your reply. We're looking at a 2 bed flat priced at around £180,000. Countrywide have said we'll be paying around £800 a month for that (based on a 5% deposit), is this accurate?

Our 3 bed, end terraced house cost £172,500, we borrowed £164k. We pay £899 on a 4.99% HTB mortgage with Natwest.

katiejc

stalkah wrote: »

Just a raw search using Nationwide as an example,


If you're looking at houses worth £220k with the EL over 30 years on a 3 year fixed you'd be looking at £655.38 a month


Using the MG you'd be looking at £1,076.42


so either you'd need to find a much cheaper home or pay higher mortgage payments

If we didn't do EL, we'd go for somewhere between £160-180,000 instead. £1,076.42 would be far too much!

katiejc

Gordon_Hose wrote: »

Our 3 bed, end terraced house cost £172,500, we borrowed £164k. We pay £899 on a 4.99% HTB mortgage with Natwest.

Oh my god, 3 bed end terraced house for that price?! I'm in Milton Keynes and everywhere here costs mega £££!