Help to buy equity loan verdict

tkullman

hello...

Ive joined this forum mainly as an attempt to try and get some sort of analysis and verdict on the HTB loan. Whilst whether you take it up or not it dependant on your financial situation (if you have a big enough wedge and mortgage capability) im finding it quite hard to weigh up the pros and cons.

Im looking to buy a property in london with a mate. Our current budget of 40deposit = to about a 280k mortgage putting us at 320 for a 2 bed in london...

With London help to buy... this in theory (hard to guestimate finances for year6 when HTB payments start) can mean we can look at brand new properties at around 400-430k.

So my grand question is... whats the best plan of action. New HTB property which may be costly aft er 5 years... or go at the low end of properties in london without using HTB?

Any advice info would be greatly appreciated!

alex_163163

Are there properties you like in London for £320k budget without help to buy? If so I'd sway to going for one of those.
I did use HTB (outside London) but the figure I was working with was much smaller - £15k!
Like you say, you dont know what your financial situation will be in 5 years time, but based on your intended career path, do you think it is likely you could afford to overpay the mortgage as much as possible in the first 5 years, and then remortgage to release equity and add the HTB loan onto the mortgage in 5 years time? Bearing in mind the amount added will be 20% of the value at the time.

If you don't add it to the mortgage in year 6 you will be paying approx £1400 interest on the HTB loan with that figure increasing yearly.

Also, if you want to remortgage after any initial fixed term and not redeem the HTB loan, you will have a smaller pool of lenders to go with so risk being stuck on a higher mortgage interest rate. There are also HTB fees payable to remortgage too.
Take a look at this website - http://www.myfirsthome.org.uk. It explains more about everything once you have the HTB loan.

I'm no professional mortgage advisor, so these are just my opinions, but I wouldn't use HTB again.
That may sound hypocritical as I have used it to buy my first property, but I went into it not fully understanding all it entailed. Like, now I am selling the property to buy with my boyfriend, it's just added complications to the sale. I have had to fork out an extra £500 (for valuation and HTB admin fees) on top of all the other costs (solicitors, stamp duty etc), and a hold up at the HTB company is now the ONLY thing delaying the sale and subsequent purchase of our new house.
So I think if you have an option you like of a cheaper property, really investigate that first before you get caught up in the shiny appealing newness of a new build using HTB.

tezzab2016

I have a question about help to buy equity loan scheme. It says the loan to be paid by sale of property or at the end of the mortgage term whichever earliest however what if someone doesn't pay anything to it, don't intend to sell the property then the 25year mortgage term ends? What action can happen? Friends have taken out one of these going into fifth year without paying to the loan and it doesn't sound to clever to me thanks

ALostMachine

You pay a service fee until it's paid back. The fee does not go towards paying back the loan.

This Help to Buy equity loan is interest free for the first five years, after which you will be charged a fee calculated at 1.75% of the equity loan plus 1%. The fee rate slowly increases year on year in line with the Retail Price Index.

Mathias123

I think it all depends on your circumstances and what you can afford.

Without HTB we wouldn't be able to get on the property ladder at this moment in time so it was a bit of a no brainer. Thanks to it we've been able to get a smaller mortgage with monthly payments only £50 more than what we pay for renting our 2 bed flat - buying a 3 bed house. As a result we'll be in a position to make overpayments on our mortgage from month one.

The service charge works out at £1 a month for the first 5 years and in year 6 we will pay around £70 per month in interest according to our worked example. Hoping by then to have saved enough to pay off at least 10% of the HTB equity loan.

If you can do if without HTB then do it as the extra paperwork adds to the complication and has delayed us exchanging contracts several times.

tezzab2016

I had seen about the monthly service fee and how it doesn't go towards the actual loan but when the 25 year mortgage has finished and you haven't paid to the h2b loan can the government enforce repossession of the property? How will they get their money if people don't pay it back by the mortgage term end? I don't see any info on this anywhere