Help to Buy Mortgage - pros & cons

cvw55

Hi all,

I'm after some advice. I'm looking into a Help to Buy Mortgage, which sounds great on paper but I am aware there are a few catches.

I just wondered if anyone had any experience/advice on the pro and cons? Positive or negative experience?

thanks

brit1234

Help to Buy just pushes prices up for the builders benefit. If you take the extra loan version work out how you are going to pay it back after 5 years. It should be banned, it doesn't help buyers, just puts them in more debt.

kingstreet

Help To Buy - Equity Loan (newbuild only) or Help To Buy - Mortgage Guarantee?

cvw55

kingstreet wrote: »

Help To Buy - Equity Loan (newbuild only) or Help To Buy - Mortgage Guarantee?

Both! Is one more advantageous than the other?

dgtazzman

MG - smaller deposit needed, but rates aren´t as good. Several lenders now offer their own 95% LTV products, I think the rates of these are better than the HTB MG rates.

EL - only for newbuilds and some builders use is as an excuse to bump up their prices and/or sell it as an incentive, while it doesn´t cost them a penny. You only have to raise a 5% deposit, but get the rates of a 75% LTV mortgage. Be sure to have a plan in place to repay the equity loan though, some lenders participating don´t have renewal products available once the initial term runs out and remortgaging to another lender while you will have the equity loan is near impossible, so you might find yourself stuck on a variable rate high interest mortgage. You will start paying interest on the equity loan after 5 years. If house prices go up, you have to pay back more, if they go down, you will pay less, but looking historically, the likelihood of prices dropping over time are very slim.

That´s it in a nutshell according to me...

cvw55

Thanks, this is really helpful. I am concerned about entering in to a Help to Buy equity mortgage with regards to re-selling/repaying but realistically it might be my only chance to get on the property ladder! Its a tough one...

dgtazzman

You could always see it at a stepping stone. Buy with an equity loan, take time to build up equity in the property (it's a newbuild, so be thinking at least 5 years, probably 10) and then sell, using part of the equity to repay the loan and the remainder as deposit for your next step.

If you plan to do this over a shorter period (move again after 2-3 years), I wouldn't bother as it will just end up costing you money as many newbuilds come loaded with a 'oooh, shiney and new' premium and any gains you do have will be eaten up by fees and stamp duty.

I sold my HTB EL house after a year, luckily local prices had gone mad in that period, so I just about broke even, but that was pure dumb luck.