FTB restricted to only HTB mortgages?

T4taylor

Hi there,
I have been to a strata new build site today and the manager asked me if I would be using a HTB mortgage (with the equity loan). I said I wasn't sure and was it possible for us to apply through a normal 95% LTV mortgage and she said she didn't think so - although did not sound that confident. If I want to buy new are my only options to save 5% then go with the equity loan mortgage or keep saving to get to 10% for a normal mortgage?

On the subject of the equity loan, the way I understand it is I would only need a mortgage of 75%LTV and Natwest currently have one (money.co.uk/mortgages/help-to-buy-mortgages.htm) fixed at 2.6% for 5 years. So therefore our mortgage payments would be lower (than 95%LTV) and we would be able to save at the same time to at least staircase 10% of the equity loan at the end of the 5 year interest free period. Would this work?

One final question, do you have to have your deposit ready in full for when we pay the reservation fee or can we keep saving whilst the house is being built? How does stamp duty fall into this?
Thanks for reading, sorry I'm new to this!

Lilla_D

Hi,

It is possible to obtain a 95% LTV mortgage for a new build flat outside the Help to Buy scheme, but your options are seriously limited and subject to T&Cs. It's normally easier to get a mortgage with the Help to Buy scheme, if you only have 5% deposit, because most lenders limit the LTV for new build properties, especially if it's a flat.

When your max borrowing is calculated for the HtB scheme, 3-5% of the HtB loan is taken as a credit commitment, so even if you don't pay for interest for that loan for 5 years, the mere fact that you have it will reduce your max borrowing.

You can reduce your HtB loan balance or repay it in full even before the 5 years are up, if you choose to.

You have to have prove the full deposit amount at the time of the mortgage application. Not when you reserve the property. If the completion is scheduled for sometime in 2017, then you might want to start applying for a mortgage soon and thus would need the deposit together.

You only pay stamp duty on completion and most lenders don't ask for proof that you have the money for it when you apply for the mortgage, so you only have to prove the money for the deposit.

T4taylor

Thank you so much for your helpful reply Lilla D

Glbooth3

We have just received an offer on our mortgage 95% LTV, not on a new build, and our deposit is gifted, we are also FTB, we had a independent broker x

ACG

Glbooth , not wanting to sound rude but your circumstances are very different. The issue is the new build as lilla mentions.

High ltvs on new builds are not the best mix ever as it limits your options, more so on flats over houses. There should be options but less than a handful.

Glbooth3

Aaah didn't realise she meant the issue was with new build I thought FTB xx

T4taylor

Thanks for the replies even though the circumstances are different. It is a new build house we are looking at and the site manager mentioned something about their builders not being signed up to standard 95% mortgages only HTB.

ACG

Thats not very good if that is the case - for you. As a company we have access to about 40 lenders, maybe more. If a broker is working off a panel then it means less options for you.

kingstreet

This probably relates to the builder not being on the Halifax newbuild panel which gives access to products upto 95% and not the usual 80% max LTV.

satchef1

I was curious about how the two options stack up, so I knocked up a quick spreadsheet in Google Sheets:

https://docs.google.com/spreadsheets/d/1lnjGbF1JbEr9I0tjm__r87SvUDFGzLeRHGr-hM4wg0Y/edit?usp=drivesdk

There's surprisingly little difference over 5 years. How much difference largely depends on what happens to house prices in your area.