Help To Buy

Chickenman1108

Hi
I hope somebody can help me. I am hoping to use the government H2B Equity Loan scheme to buy my first home.
I understand how it works pretty much. However there's one area that I'm confused about.
I keep reading that you can only get a mortgage up to 4.5 times the value of your gross annual salary.
My partner and I will be doing this together, so our combined annual salary is £53k.
4.5 x 53 = approx £240000.
We are looking for properties around the 300k price. We have a 15k deposit, and with the H2B Equity loan of 40% (were in London) being 120k, this means we only actually require a mortgage to the value of 165k.
So with 4.5x our annual salary being far greater than the 165k mortgage that we require, we should easily get approved for the mortgage.
But surely, if we are still borrowing 120k from the government as an equity loan we would need to be earning more than this to get approved. Does the 4.5 x our salary need to amount to the OVERALL amount that we are borrowing (ie the mortgage plus the equity loan) or is it just the value of the mortgage?
I hope this makes sense. Im confused

kingstreet

Download the Govt's HTB AC and establish what is possible and don't forget your mortgage affordability is going to be affected by the equity loan and things like ground rent & service charges, if any

https://www.gov.uk/government/publications/help-to-buy-equity-loan-calculator-and-guidance

alex_163163

Have you considered taking out a smaller % H2B equity loan, if you can afford a larger mortgage? You don't have to take the full 40%.
I know it may seem great in the short term having such lower mortgage payments, but have you thought how you are actually going to pay the equity loan off? Plus it's not just £120k you will be paying back, it's 40% of the value at the time you either staircase the loan or sell the property.

john987

The cap is on the mortgage element only. We are currently using HTB and borrowing over 5 times our income in total but less than 4.5 on the mortgage.

Chickenman1108

Excellent. Thanks for that. Really pleased about that

Chickenman1108

I think we're most likely to take a 25-30% equity loan. I'd actually rather take a greater mortgage now that I know the 4.5x only applies to the mortgage itself. Thank u