Is 5% deposit with Help to Buy worth it for me?

vitaminz · 1 September 2016 at 12:59PM

Hi all, I'm currently looking for a family home as a first timer buyer and I'm a bit confused about whether I should actually go for a 5% mortgage.

I currently earn £31250 a year (in negotiations with my boss for extra pay, I have had offers for around £38000 but instability is the last thing I need when applying for a mortgage), and am in receipt of DLA @ £307.40 a month, and child benefit for one child at the usual ~£82 a month rate. My fiancee isn't working but is in receipt of Carers Allowance for caring for her disabled mother, and she gets £244 a month for this. I currently have ~£23k saved

Not all lenders take the benefits into account but Nationwide do, and with a 10% deposit I can get a loan of around £180000 (with £18000 deposit), while other lenders offer me much lower (£140000). We've found a house that we have fallen in love with however it is on the market for £197500. The ~£20k deposit is doable, and I will of course be offering lower, but it would leave 3k for stamp duty, legal fees etc. My fiancee has £2k worth of savings that may help, and her parents are prepared to help us with furniture etc if need be.

I'm interested to know what impact a 5% 'Help to Buy' mortgage would have on the amount I can lend, and whether it's actually worth the increase in interest rates etc. I'm speaking to Nationwide tomorrow but I'd just like to know everyone's thoughts on here

As an aside, me and my fiancee both have Help to Buy ISA's setup from last month. I put £1200 of my savings in each, and this month I've topped it up to £1400 in each. At what point am I able to get the bonus? I've heard varying stories about this.

DRMANTISTOBOGGAN · 1 September 2016 at 4:25PM

Depends - do you think you'll be able to repay the loan within 25 years and afford the interest repayments in the meantime along with your mortgage payments?

Also when you say you'll be offering lower, are you aware the Equity Loan scheme is only available on new builds? Developers are reluctant to take offers generally ..

vitaminz · 1 September 2016 at 4:33PM

Thanks for your reply, I'm looking at a 35 year term as I'm currently 27 so it gives me a good amount of time to repay. I'm not looking at the equilty loan scheme, instead I'm looking at the 'mortgage guarantee'

DRMANTISTOBOGGAN · 1 September 2016 at 9:20PM

Apologies I'd assumed. In that case as far as I can see the mortgage guarentee scheme is a really good option if it's a house you're not planning on moving out of before term.

Only thing to be careful of is the house can't be more than 4.5 times your income - without your fianc!e working you'll have to find a lender who accepts benefits/carer allowance as income like you suggested in the first paragraph!