First-time buyer - Government equity loan

musafir05

Hi,

I'm a first time buyer and together with my brother (also a first time buyer) want to step into the property ladder by the help of the Government equity loan, 5% deposit and 75% mortgage. We both earn £1734 and £1450 after tax monthly and the only outgoing monthly obligation is a car payment which both my brother and I share. We both have no credit card debts. Between us we have £30k saving and looking to purchase a new build property worth £275k. How likely it is to obtain a 75% mortgage?

Furthermore we are moving with our parents therefore they will contribute towards a few bills but me and my brother will solely be responsible for paying the mortgage and council tax.

Advice would be great.

megaginge

Back of a fag packet, your joint income is about 48k? Is this consistent over the past 6 months of payslips at least?

Assuming 4.5x on affordability, that'd mean you can take a mortgage of approx 220k. But that's what you need to be able to repay the capital of. RTB complicates things. Assume you can borrow 20% more and you're close. 260-265.

Bear in mind on a property of that size you're likely to need another 6-7k to cover fees. As you're borrowing RIGHT at the threshold of LTV you won't be able to put these on the mortgage. You need them in addition to our mortgage.

The affordability criteria won't take into account that your parents will contribute something as far as I'm aware.

Sounds like you'll be close. Speak to a specialist RTB mortgage broker! But as well as your 5% you'll need to make sure you can settle the fees..

And personally I think the equity scheme is a bad idea. As I've posted elsewhere, assuming your property enjoys growth of 30% total over the net 5 years, at the point at which you need to pay .gov back you won't owe them 40-50k any more, you'll owe them 65. You'll then have to pay that back. 3% in year one, rising with RPI so quite sharply after that. Can you pay that back? If not you'll have to sell the place to settle up with .gov. You'll have earnt a bit towards the next place, but that next place has also gone up in value. How will you still have a home 6 years from now?

Just some food for thought.

musafir05

The monthly payments are consistent for the last 6 months.

I'm aware of the fees involved in buying a house therefore I have planned to save up for a few more months to cover the amount.

I'm aware of the what happens after the 5 years are up. The fees involved and chance of stair-casing up. I'm planning to sell the property and move. However this is only possible if the developers offer discounts on the asking price, as the new build is ridiculously priced.


Currently the house I'm interested in is right across the street therefore my parents are being pushy in reserving a plot. The price of 275k is very steep considering average 4 bed prices in the area is only £220/£230. I'm in conversation with the developers to meet me at that price range. However since the site is under development, the builders are not interested in bargaining.