Do you think Help to Buy is worth it? Details inside...

zzzt

In a hypothetical scenario you would like to buy your first home. Over the last few years through careful spending and saving you have managed to save enough for a 5% deposit. Do you:

1. Use the Help to Buy Equity Loan to buy a new build (and possibly more expensive?) house with your 5% deposit, and then during the next five years, try to save up enough money to pay off as much of the government's 20% loan as you can before you are charged interest on it.
2. Use the Help to Buy Mortgage Guarantee to buy an existing (and possibly cheaper) house with a 5% deposit and then pay back the mortgage that presumably has a terrible rate, but at least your money is going towards buying the property instead of into the hands of a private landlord.
3. Carry on renting, but keep putting money aside for a deposit. In September 2015 when the government's Help to Buy ISA becomes available, put your money into it and then continue contributing at least £200 a month into the ISA. Wait until you have enough for a 20% deposit (less £3000 that the government will contribute) and then buy a house with a more favourable mortgage. Assume it would take you at least 5 years to save enough.
4. Same as 3, but wait until you have enough for a 40% deposit.
5. Continue renting forever and give up the dream of owning your own home.

What do people think is the best option?

alibean121

I'm aiming to buy my first home soon(ish) and I'm aiming for a 10% deposit. I think I'd struggle to get mortgaged with much less than this help to buy or otherwise... I feel that saving much beyond this for a first home just to save on mortgage rates is false economy considering how quickly prices are rising.

I don't want a new build, they've very overpriced in this area so the help to buy is out. If I wanted a new build, I'd definitely take that as soon as possible probably.

sebadee

We waited out until we got to the 10% mark and that has worked out well. We went for a place going for 210k with a 21k deposit and got a rate of 2.7% fixed for two years.

Our plan now is to overpay as much of the 7% we are allocated each year to get the equity down (or is it up?), so that when we renew in two years, we will have a better LTV and hopefully a better rate (well better according to what the rates are at the time, should we had not have paid down).

corbyboy

Incidentally, how different are the rates with the Mortgage Guarantee scheme in comparison to non-HTB mortgages? Are lenders taking advantage of buyers knowing that this is their only method of buying a house or are we just making assumptions?

kingstreet

corbyboy wrote: »

Incidentally, how different are the rates with the Mortgage Guarantee scheme in comparison to non-HTB mortgages? Are lenders taking advantage of buyers knowing that this is their only method of buying a house or are we just making assumptions?

HTB - MG rates are about the same as those for non-HTB products at 95% and if they are higher it's because the rate collects funds for the repossession indemnity scheme the Government guarantees.

alibean121

kingstreet wrote: »

HTB - MG rates are about the same as those for non-HTB products at 95% and if they are higher it's because the rate collects funds for the repossession indemnity scheme the Government guarantees.

Absolutely, similar to non-HTB mortgages at 95%, unfortunately mortgages at that level are pretty expensive. Much more so than at 90%.

Anyways, I personally won't be in a position to buy until a promotion comes through in September and I'm hoping to have 10% in place.

zzzt

I'm leaning on the side of using the government ISA scheme for 5 years. I'd like to do it faster, but as I understand it the maximum you're allowed to put in is £200 per month, on which the government gives you £50, so it would take 5 years to get the maximum bonus of £3000.

I dunno if I'd be waiting too long to get on the housing ladder though. In the long term if house prices go up it might just be better to be paying off a mortgage than to save for a bigger deposit, even if I start out with a bad rate, I could work towards paying off as much as I can in the early years and then remortgage like sebadee said above (I didn't realise that was a possibility before).

Do mortgage brokers usually charge for advice, or do they take commission in some way for getting your custom to a lender?

Chocolatefund

I'm aiming for 15 to 20 percent.

On my salary of 22k, I can realistically only borrow between 80 to 100 ( and 100k is pushing it). Flats in the area I want to buy are about 115+ So I've decided to save up the difference and buy in the area I really want rather then look further out for something cheaper.

I can't start looking till September anyway due to work, so I might as well keep saving