HTB Query / Advice on Situation

kingstreet

Nearly.

Your equity and deposit is one and the same thing. All you have to do is put down at least 5% from your money as long as that plus the equity loan plus the mortgage money equals the purchase price.

If you want to buy for £440,000;-

£440,000 less
£88,000 equity loan
________

£356,000 required from mortgage/deposit.

If your maximum mortgage is £244,800 (how do you know this?) take that away from the £356,000 you need, leaving you needing to put in £111,200.

That can come from your equity in your current home, savings. lottery win.

As your current home is being sold, your buyer's deposit will pass up the chain so you will not have to come up with a cash deposit of your own. Your solicitor will confirm this.

Back to what you can borrow. Make sure you are using the Government/lender affordability calculators correctly. Lenders expect you to include 3% of the equity loan as a credit cost to ensure you are not over-borrowing if they don't allow for it elsewhere. Check to make sure.

oligopoly

kingstreet wrote: »

Nearly.
If your maximum mortgage is £244,800 (how do you know this?)

I have an agreement in principle - after agreeing a sale on our house and then being gazumped on a property, there doesn't seem an awful lot left available at present. I was against the idea of H2B initially, instead preferring to buy and do up a house a bit more organically but I'm starting to get desperate (and of course the idea of a new house is appealing...)

Of course I would run associated affordability checks and have a good think about the pros and cons, but it's interesting to know that this could possibly work for us. Thanks for your help.

kingstreet

Did the agreement in principle know you were looking at HTB Equity Loan and include the cost?

If not, what you can borrow will fall with the inclusion of the notional cost of the equity loan as I mentioned.

Lenders also cap borrowing at the HTB level of 4.5 x so this may affect what you can borrow compared to what you have been told.

Many, many people come to us and tell us they can borrow £x. When they have affordability calculated correctly to take into account the HTB Equity Loan, the LTI cap and any ground rent/service charges, often the figure drops from what they were told originally.

In addition, you have to follow the lower of the two outputs, lender or Government. If the Government calculator says you have to borrow less, it doesn't matter what the lender will offer and vicky verky.

oligopoly

kingstreet wrote: »

Did the agreement in principle know you were looking at HTB Equity Loan and include the cost?

Ah. No. Ok thanks - need to speak to an advisor face to face. I appreciate your help once again.

scp941

kingstreet wrote: »

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!

My broker managed to get me a HTB EL for me on an 18 year mortgage ending at age 75. The only condition on it was having to stump up an extra £2,500 on top of the 5% deposit.

I was quite surprised there was any flexibility because he warned me the EL might be a problem because of my age and it not being over the usual 25 years term.

kingstreet

scp941 wrote: »

My broker managed to get me a HTB EL for me on an 18 year mortgage ending at age 75. The only condition on it was having to stump up an extra £2,500 on top of the 5% deposit.

I was quite surprised there was any flexibility because he warned me the EL might be a problem because of my age and it not being over the usual 25 years term.

It changed in February when the new Buyer's Guide and HTB Affordability Calculators were released.