help to buy scheme advice?

grahamlindsay

As a first time buyer I am in a fortunate position to have a decent (20%+) deposit.

However I have noticed the government are doing a scheme in which they provide an interest free (for 5 years) equity loan of 20%

As someone with a reasonable desposit would I still be able to take advantage of this? Having 20% of my mortgage interest free would be a huge advantage

Can you also pay it off at the 5 year point so you pay no interest on it?

Thanks in advance

gigi7

Hi, as far as im aware it is for those who have 5% (might be 5-10%) deposit and allows them to only have to borrow 75% from the bank.. Im also pretty sure it is only for new builds unless they have introduced an additional scheme. It is also restricted to properties up to 600k in price, must be your only property and you cant sublet - i know you didnt ask that but its worth taking into consideration.

You could benefit from it by using part of your deposit to equate to 5% of the house price.

gigi7

Forgot to add you are able to pay back the equity loan early

grahamlindsay

Thanks. I looked on the government website and it wasn't clear if it was a maximum or minimum of 5% deposit.

I'm not really looking a new build but if I could take advantage of this for a further 20% interest free then it would be worthwhile. It would essentially take my deposit to 40%+

I think in my case I would be better off just using the 20%+ deposit I have saved.

selement

I haven't made the right enquiries to know this for sure, but my impression was that you have to need the government loan (as in could not afford the house otherwise). So they might think your current savings mean you aren't eligible? I am not certain though.

stator

Buying new build is risky, negative equity etc. All new build houses are overpriced.

If house prices go up you would lose out as to pay off the loan you have to pay 20% of the current value.

But yes you could use the scheme, if you wanted. You put down 5%, government loans 20%, mortgage for the rest. Or you could put down 20% deposit, 20% equity loan and 60% mortgage. Not sure why you would though.
Help to Buy Equity Loan is a restricted market, not all banks offer it, you can't port easily etc.

gsmmad

You can have 20% deposit and take advantage of the equity loan however this is only on a new property. It will allow you to get 60% LTV which will allow you to get some great mortgages.

You can only borrow from certain lenders: http://www.helptobuylondon.co.uk/useful-information/participating-lenders

When you pay back the 20% HTB equity loan, you will have to do this at the present house value. If the house price goes up, you pay more. If it goes down, you pay less.

It's an interesting risk. Lower interest rates + free interest for 5 years on the 20% equity loan but the potential to pay more for that 20% in the future.

gsmmad

selement wrote: »

I haven't made the right enquiries to know this for sure, but my impression was that you have to need the government loan (as in could not afford the house otherwise). So they might think your current savings mean you aren't eligible? I am not certain though.

This is on Share to Buy not HTB.

gsmmad

stator wrote: »

Buying new build is risky, negative equity etc. All new build houses are overpriced.

If house prices go up you would lose out as to pay off the loan you have to pay 20% of the current value.

But yes you could use the scheme, if you wanted. You put down 5%, government loans 20%, mortgage for the rest. Or you could put down 20% deposit, 20% equity loan and 60% mortgage. Not sure why you would though.
Help to Buy Equity Loan is a restricted market, not all banks offer it, you can't port easily etc.

I'm currently getting 2.54% fixed for 5 years from Nationwide. I am putting 10% deposit, 20% equity loan. 70% LTV.

Darksparkle

gsmmad wrote: »

This is on Share to Buy not HTB.

It's part of the HTB criteria in Scotland.

"the scheme is only available to those who are unable to afford to purchase the property without the Government purchasing an equity share in the property, i.e. if you are able to afford over 90% of the purchase price through a combination of available mortgage and deposit, your application is likely to fall"

grahamlindsay

stator wrote: »

Buying new build is risky, negative equity etc. All new build houses are overpriced.

If house prices go up you would lose out as to pay off the loan you have to pay 20% of the current value.

But yes you could use the scheme, if you wanted. You put down 5%, government loans 20%, mortgage for the rest. Or you could put down 20% deposit, 20% equity loan and 60% mortgage. Not sure why you would though.
Help to Buy Equity Loan is a restricted market, not all banks offer it, you can't port easily etc.

The downside is that it is a new build and the obvious restrictions that apply to the scheme however it could put me in a position in which my 25% deposit combined with my 20% equity loan would put me in a position where I am only paying interest on 55% of my capital. As opposed to 75%

This also means I could pay it off quicker for the same cost and again further reducing the interest dramatically.

Its just weighing up whether an extra 20% interest free is worth it to be limited to a new build (not my ideal choice) if it means dramatically reducing the mortgage.