Help to Buy Mortagage Guarantee question

lonewolf123

Hi

I was looking into the HTB scheme and from what I understand is that I can buy a house for up to £600k as long as I have 5% deposit and of course fulfill all other criteria.

So am I right in thinking that I can borrow up to £570k under this scheme if I have a £30k deposit?

However I have also heard that I can only borrow up to 4.5 times my salary from the bank under this scheme so which is right?

I have also went on various banking websites and used their mortgage calculator and most of them only wanted to lend me between 200k to 300k.

mrginge

You are perfectly able to borrow £570k if you pass the lenders affordability.

As a ball park you'll probably need an income of around £140k

lonewolf123

mrginge wrote: »

You are perfectly able to borrow £570k if you pass the lenders affordability.

As a ball park you'll probably need an income of around £140k

Thanks for the reply.

So I must have misunderstood it then. It does appear that I can only borrow up 5x my salary.

Slightly weird that the threshold is set at £600k then....it is slightly worrying to think that people that earn in excess of £140k still need to use this scheme...partly why I thought I could borrow up to £570k if I wished to even though that meant its like 10x my salary.

mrginge

lonewolf123 wrote: »

Thanks for the reply.

So I must have misunderstood it then. It does appear that I can only borrow up 5x my salary.

Slightly weird that the threshold is set at £600k then....it is slightly worrying to think that people that earn in excess of £140k still need to use this scheme...partly why I thought I could borrow up to £570k if I wished to even though that meant its like 10x my salary.

HTB MG is essentially the same as a 'regular' 95% mortgage. The difference is that the lender is indemnified against some potential loss by the government.
As a borrower you still have to pass the same affordability as any other 95% product.

Kingstreet or some other knowledgeable chap will correct me if i've got that wrong

stator

It's because the Tories love subsidising the middle classes and want to push up house prices across the board, not just at the bottom of the market.

Really the mortgage guarantee scheme doesn't change anything from the buyer's perspective, it's just a way the government have of convincing banks to lend at 95% when they might not without the scheme.

lonewolf123

I don't understand what all the hype is about then....this scheme is borderline pointless to most buyers then is it not?

This is essentially made for people with middle to high income but never thought about saving for a house.

I want to buy a house near London and we are talking about £300k to £400k. I have always been saving for a deposit but the house prices rise faster than I can save. I was therefore hoping the scheme can help me borrow more from the bank but clearly not then.

GMS

Any mortgage needs to have proven affordability.

You can't borrow what you can't afford regardless of scheme the product may fall under.

libf

lonewolf123 wrote: »

I don't understand what all the hype is about then....this scheme is borderline pointless to most buyers then is it not?

This is essentially made for people with middle to high income but never thought about saving for a house.

I want to buy a house near London and we are talking about £300k to £400k. I have always been saving for a deposit but the house prices rise faster than I can save. I was therefore hoping the scheme can help me borrow more from the bank but clearly not then.

Help To Buy is certainly very useful to a lot of people.

As an example for HTB equity loan:

Bob earns £35k a year, so Bob can borrow £157k (as we'll assume that Bob has no debts). So if there was no Help to Buy then Bob would need to have a deposit of 10% to go with his mortgage of £157k, so the most he could offer for a house would be about £174k (£157k mortgage, £17k deposit).

Now with Help to Buy Bob can still borrow the same amount but now this £157k is 75% of the total cost of the property instead of 90% and he only needs a 5% deposit. So the total he can offer is ~£209k, made up of ~£10k from himself, ~£42k from the government and his £157k mortgage. And as the LTV is better his payments will be more affordable too.

So Help To Buy doesn't let you go out and get yourself into as much debt as you like, no, but that doesn't mean it's not helpful.

kingstreet

libf wrote: »

Now with Help to Buy Bob can still borrow the same amount

Don't forget lenders take 3% or 4% of the equity loan into account for affordability, so what you can borrow for a "normal" mortgage is more than you can borrow on HTB - EL.

Teqpro

"Well said libf" its made a positive impact for me, although it does depend where you live in the UK with property prices rising etc.

libf

kingstreet wrote: »

Don't forget lenders take 3% or 4% of the equity loan into account for affordability, so what you can borrow for a "normal" mortgage is more than you can borrow on HTB - EL.

Sorry, should have said can still borrow the same salary multiplier assuming that affordability works out.