Help to buy

Little_star_2

Wanting some advice / thoughts on the help to buy scheme.


We have sold our house and purchasing our next home with a help to buy scheme (new build property) with a 5% deposit.


So, after 5 years the 20% loan from govt needs to be paid back, otherwise interest will be added to the loan (after year 6).


We won't have enough money to pay the 20% back after this time, given if the market stays the same.


Is it worth pursuing?? We would probably be short of £20-25k after 5 years as some of the equity from our property sell is being used to pay for solicitors, carpets, mortgage redemption fee and other fixtures and fittings.


Thanks

[Deleted User]

You need to do some in depth research on the help to buy scheme as it is not all as black and white as it may seem. The government don't just 'lend' you the 20% deposit, they also want 20% equity in your house. That's the catch.

Personally, I think it's absurd that anyone who has already bought a house should get help to buy anyway.

alice_kate_2

We have got help to buy.

We bought our first house a year or so ago using it.

We personally found it very helpful as the prices were rising faster than we could save, and thanks to this we got an ideal first home.

The options you've got are: pay the interest after the 5 years, remortgage to pay it off, save up the money to pay it off (you can't do bitty payments it has to be chunks - I think 10% of the value of the house - or 50% of the equity if that makes sense) or sell the house.

We were never going to stay in the house for 5 years anyway so we're not worried about it, but remortgaging to cover the loan was something we considered. We were starting out in our careers though so knew our pay would increase to get the higher mortgage later on if we wanted to.

You do need to consider that you owe 20% of the value of your house, not just the original amount loaned. So if your house price goes up significantly, so will the equity loan.

CLAPTON

Little_star wrote: »

Wanting some advice / thoughts on the help to buy scheme.


We have sold our house and purchasing our next home with a help to buy scheme (new build property) with a 5% deposit.


So, after 5 years the 20% loan from govt needs to be paid back, otherwise interest will be added to the loan (after year 6).


We won't have enough money to pay the 20% back after this time, given if the market stays the same.


Is it worth pursuing?? We would probably be short of £20-25k after 5 years as some of the equity from our property sell is being used to pay for solicitors, carpets, mortgage redemption fee and other fixtures and fittings.


Thanks

reread the rules : the loan doesNOT need to repaid after 5 years

kingstreet

Fee payments start in year six and are based on 1.75% of the original loan. These increase each year and if inflation runs at 5% per annum they will be based on 1.87% in year seven, 2.0% in year eight and so on.

There may be a point where replacing the equity loan with mortgage debt becomes sensible, but you need to have one eye on the rate comparison and another on the value of your home.

For example, if the value falls, the amount you pay back falls too.

ScorpiondeRooftrouser

Deleted_User wrote: »

You need to do some in depth research on the help to buy scheme as it is not all as black and white as it may seem. The government don't just 'lend' you the 20% deposit, they also want 20% equity in your house. That's the catch.

Personally, I think it's absurd that anyone who has already bought a house should get help to buy anyway.

It's not absurd; it works well to do what it is intended to do. Transfer public funds into the hands of the big house builders. There was a chance of their profits falling before this came along to help them.

King_Nothing

kingstreet wrote: »

Fee payments start in year six and are based on 1.75% of the original loan. These increase each year and if inflation runs at 5% per annum they will be based on 1.87% in year seven, 2.0% in year eight and so on.

There may be a point where replacing the equity loan with mortgage debt becomes sensible, but you need to have one eye on the rate comparison and another on the value of your home.

For example, if the value falls, the amount you pay back falls too.

Is that fee a yearly fee?

Little_star_2

Yes it's an annual fee...

King_Nothing

Cheers, thought as much, worked it out, and thought it would be a bit much having to pay that amount back every month, as well as trying to pay the mortage.

kingstreet

It's annual, but can be paid monthly.

If you raised the money via a mortgage instead, the higher LTV will put the rate up probably past 1.75% and you're going to pay that for five years before the equity loan payments start.