HTB Query / Advice on Situation

oligopoly

Hoping someone can help – I’m confused by what I’ve read about HTB and would appreciate opinions on whether I’d be better off with or without it.

I’m looking to buy a 4 bed house in Southern UK. Our deposit will be £70k. Previously I’d been looking at properties around £320k which would give monthly mortgage repayments of approx. £1k on 25 year term or £875k on 30 year term.

Under the HTB am I right in saying we could get a 20% loan from the government = £64k? And then would we have the option of either adding this to our £70k and having a £134k deposit or using the Government loan as a deposit and keeping our money for improvements/savings/mortgage overpayments?

Our plan would be to live in this house for 5-10 years, so I’m aware we would need to start paying the interest in year 6…

Of course there’s also (presumably) the option to use the HTB money with our own to go for a bigger/more expensive house, which I suppose is the age old mortgage question – stretching your money vs. paying off quicker!

Finally, is the HTB only for new builds, also for new builds or for anything but new builds as I’ve heard conflicting comments.

All thoughts welcome!

amnblog

The info is here

http://www.helptobuy.gov.uk/docs/default-source/default-document-library/help-to-buy-equity-loan-buyers-guide.pdf?sfvrsn=6

The Equity Loan Scheme is for new builds only.

When the Scheme came out we were so amazed that it could be used to buy a bigger property than a family 'needs' that we checked and that is the case.

You can reduce your cash-flow or increase your purchase price at the same cash-flow - its up to you.

oligopoly

Thanks for reply. So if we went down the New Build route, in theory we could buy a house for £450k (if a bank would lend us this much) - the govt would put in 90k, plus our 70k = 290k left to borrow. Google says a mortgage of £1,100 on 25 year / £950 on 30 year.

Then in year 6 we start paying 1.75% of 90k = £1,575 per annum = £131.25 per month ?

Then in year 7 it's 2.75% of 90k (less what's been paid off, which would be largely negligable) = an additional £206.25 per month ?

So they're encouraging you to sell after year 5!?

Mummyto4kids

We are using HTB on a new build - I don't think the idea is necessarily to encourage you to sell, its to give you the five years of reduced mortgage payments to save up or overpay your mortgage to a sufficient level where you can repay the equity loan. That might be through paying it off via savings, or by re-mortgaging. We've got a mortgage product that we can over pay on, and we have also set up a savings account and worked out a good amount to save each month so that we can repay the loan at the end of year 5.

oligopoly

Mummyto4kids wrote: »

I don't think the idea is necessarily to encourage you to sell, its to give you the five years of reduced mortgage payments to save up or overpay your mortgage to a sufficient level where you can repay the equity loan.

I think you're spot on with this. So end result is to get a new build within your means so that you can put money aside in the first 5 years. Got it!

kingstreet

oligopoly wrote: »

Thanks for reply. So if we went down the New Build route, in theory we could buy a house for £450k (if a bank would lend us this much) - the govt would put in 90k, plus our 70k = 290k left to borrow. Google says a mortgage of £1,100 on 25 year / £950 on 30 year.

Then in year 6 we start paying 1.75% of 90k = £1,575 per annum = £131.25 per month ?

Then in year 7 it's 2.75% of 90k (less what's been paid off, which would be largely negligable) = an additional £206.25 per month ?

So they're encouraging you to sell after year 5!?

Your number for year seven is out.

It's 1.75% in year six, then add inflation plus 1% each year. If inflation is 5%, that means in year seven your payment will be based on 1.87%, in year eight 2.0% and so on.

I suggest you read the Buyer's Guide if you aren't sure.

You must borrow at least 25% of the property value. Your mortgage must end by age 70, be no more than 4.5 x income and debt to household income no more than 45% assuming a mortgage rate of 4.8%. There is a Government HTB affordability calculator to satisfy as well as your chosen mortgage lender's!

Do not forget that when you repay the loan it is based on the property value at that time and not what you borrowed at the outset.

oligopoly

Thanbk you for the correction. I am now practically certain that HTB is not suitable for me - a new build 4 bed is too expensive in the South! Thanks everyone.

oligopoly

Sorry to resurrect my old thread but I'm confused. I've dismissed the idea of new builds as the ones near me are terribly overpriced and cramped. But I've just been reading about the HTB Mortage Guarantee scheme.

I have a deposit of £100k and am currently looking at a purchase price of £315k (£215k is the most i can borrow) - could this scheme allow me to purchase a house with a higher price and if so what are the drawbacks? I really don't understand it all. Thank you in advance.

kingstreet

No.

It's only of use if you have under 10% deposit. It is not a way of borrowing more as it's again capped at 4.5 x income.

https://www.helptobuy.gov.uk/

oligopoly

kingstreet wrote: »

No.

It's only of use if you have under 10% deposit. It is not a way of borrowing more as it's again capped at 4.5 x income.

https://www.helptobuy.gov.uk/

thank you for the clarification!

oligopoly

kingstreet wrote: »

No.

It's only of use if you have under 10% deposit. It is not a way of borrowing more as it's again capped at 4.5 x income.

https://www.helptobuy.gov.uk/

kingstreet - please be gentle! Am i getting this wrong?

I have approx £112k equity after selling house and solicitors etc.

£440,000 purchase price on a new build

£244,800 max i can borrow from bank
£88,000 government 20%
£22,000 me 5%

= £354,800

and then top up with £85,200 of my equity.

Yes or no!?