FTB mortgage/deposit confusion

twentynine

Apologies in advance for my inexperience here, please don't shout at me for my ignorance! If you can, please help to answer one or more of my mini-queries!

I'm a potential FTB, hoping to buy a property valued at £100k, with a 95% mortgage (Help to Buy Mortgage guarantee scheme).
I am yet to make any offer or apply for mortgage proper - currently have 4000 in HTB Isa, and about 800 in instant savings, and mortgage AIP.

All of the housebuying timelines I have looked at state that when exchanging contracts one would usually pay a deposit of 10% of the property price. Query 1: is this still the case if buying with a 95% LTV mortgage, or are there circumstances where a 5% deposit is accepted?

If so, at what point would a buyer go about mentioning this?

And final question (if you are still reading and haven't rolled eyes to point of no return yet, then I salute you), the HTB mortgage guarantee ends on 31 dec 2016. How far into process of housebuying do I need to be on this date to take advantage? Offer made/mortgage accepted/exchanged/completed/other?

Thank you so much

Confused and single and could really do with dating a finance expert.

Mithos

I'm pretty sure when a 95% (or higher) mortgage is / has been agreed, the required deposit will reflect that. It's not going to work out if they are expecting you to pay 10k when you only have 5 so I wouldn't worry about that. . (If you haven't already don't forget you'll likely need some money set aside for Solicitors costs in addition to your deposit).

I don't know enough to comment on the Help to Buy rules, but if no one comes along with an answer, it's highly likely you're find cut off dates in the official .GOV documentation.

Best of luck, hope you get the property!

twentynine

Thank you Mithos. I'm finding the unknown a complete minefield!

Money for solicitor's/surveys factored into my own timeline, so long as I don't get absolutely rinsed.

Does one apply for official mortgage only after deposit is secure, or can you do it when you know you are about two paydays away from target?

Many thanks

Mithos

House buying is really complicated in some ways but when you make it out the other side it seems simple! The best way to deal with it (in my opinion) is to understand the overall process so you know what to roughly expect and plan for, then one small step at a time. That will help you deal with the unexpected and reduce your stress levels.

I'd say a good way to do it is:

Know your budget. View properties. Make an offer. Once the offer is accepted the Estate Agent will want to know your circumstances and likely see proof of your deposit. If you don't have it yet then it might get sticky and potentially the Estate Agent will report this back to the Vendor.

The Vendor might be happy to wait though, for example if they've not found a place to move to, or they may put it back on the Market in case someone else comes along first. On the plus side you'll find Vendors are typically slightly more accommodating of FTB's both in asking prices and personal circumstances.

The Mortgage Lender will quite likely want proof of your deposit as part of the application process, so you might need to wait until it's in your account before applying I'm afraid.

Could you make an offer now which is based on your current deposit? They may accept a lower offer and you can be ready to go now?

twentynine

If I made an offer based on current deposit I would have zero pounds and zero pence for any other expense that flung itself in my path. I guess I can contently wait a couple of months before making a formal application, and just hope that things fall into place before the Help to Buy scheme expires. If not I will just have to wait a little longer until I have a 10% deposit, assuming tomorrow's referendum doesn't turn the world on its head. I'm sure I can tolerate my housemate's hugely irritating but harmless foibles a little longer!

Thanks again for your input and patient answers!

evansc1

I'd wait until you have enough in the bank for the deposit (you have £5k effectively already with the govt top up - wahoo) and all the lender/legal expenses. So around £9-10k saved before getting full mortgage application in to not have any issues with the EA and also your lender.

Obviously bear in mind that you will likely need to buy a lot of appliances and furniture for your new home, so unless that will all be coming with you, it may be worth waiting until you have a few thousand pounds more unless you are willing to spend on credit card (ensure you get a 0% one if you do have to take one out!!). If you go the CC route - make sure you can afford the mortgage and CC repayments though, as well as anything else you have going out regularly!

Not a clue on the end date requirements for the HTB MG part sorry.

twentynine

Thanks Evansc1, fortunately I have amassed all the home furnishings and appliances I could ever need after 12 years of renting unfurnished - in fact will probably have to lose a lot as 100k property = fraction of the size I'm living in now!

Am I correct in thinking that the help to buy bonus cannot be used as part of exchange deposit though as you only get it on completion - so I would in fact need to have the equivalent of bonus in cash and it would be 'knocked off' what I ultimately owe?

I think I probably need to budget a bit more for the legal/lender/unexpected expenses. I have been budgeting based on the cheapest lower end eg £0 product fees, pop ups saying 250 quid conveyancing etc, £0 Stamp duty and so on. I imagine people will milk me for cash wherever they can.

Life...so expensive

evansc1

That's good then. Factor in some removals then if you don't want to be logging all the furniture down the street yourself ha. Could potentially raise some funds with getting rid of some bits which is always good!

That's how I understand it also in regards to getting the bonus - currently going through the same process actually so can't say for certain but I'm sure someone will be able to answer that on here - if not, mortgage advisor /solicitor definitely can. One thing on that actually - make sure that the solicitor you go with is registered to be able to claim the bonus for you. Seen many a thread on here where buyers are realising that that their solicitor isn't currently capable of claiming the bonus....helpful!

Be careful saving on the basis of the low end of fees. you don't want to get through the whole process and then realise that you don't have the funds available to complete because you figured you'd be able to get all the lowest fees and rates!

Seller won't be best pleased if you have to delay completing by a few months

twentynine

good point! I suppose if I do budget for maximum costs, and it comes in cheaper, then it's win-win.

Secretly half hoping there is a major house price plummet after today's vote and I can buy a 14 bed castle with my 4k deposit......

Peccary

Hi, We told our conveyancer that we had less than 10% deposit at the beginning of the process, the question was asked on the initial document they sent on instruction. They then advised the vendor could sue for the rest should you pull out after exchange. I assume this is standard in these circumstances?


We understand the HTB bonus in the same way you do, the money is paid to your lender after completion and knocked off the total.

spikyone

Just as a word of warning - you can't possibly have £4k in a HTB ISA yet; the maximum possible is currently £2400 plus interest (£1200 in the month of opening - December 2015 at the earliest - and £200 per month after that). If you've somehow managed to overpay, you will run into trouble trying to claim the bonus on a higher amount. Your ISA provider should have spotted this and refunded any overpayment though.

When - or if - the HTB mortgage guarantee expires, it is entirely possible that lenders will still offer 95% LTV mortgages - they may just be a little pickier about eligibility. Given that the current government seem keen to prop up buyers, rather than put a lid on house price inflation, I strongly believe that the HTB mortgage guarantee (or something like it) will be around well beyond the end of this year.