HTB interest free period is now up

MobileSaver

AG47 wrote: »

Interest rates are only going up from here

Unlike your Bitcoins...

AG47 wrote: »

I still think bitcoin will be $100k by 2019,

Looks like your Bitcoin gambling has lost you 40% of your money in just one month. Ouch!

kingstreet

AG47 wrote: »

Many didn't understand what they were getting into, as interest rates rise they will be struggling to even pay back the part of the house that the bank owns, now they have to pay back to the government as well

Interest rates are only going up from here

When you submit a PIF & Reservation for an HTB case, you get one of these back with the Authority to Proceed and a copy of the HTB Buyer's Guide;-

PERSONAL WORKED EXAMPLE (WITH NO PARTIAL REDEMPTION) FOR: Mr & Miss XXX

You have found a property which is valued at £270,000.00

The Homes and Communities Agency (the Agency) has agreed to loan you 20.00% (in return for you entering into an equity mortgage in favour of the Agency). You will fund £216,000.00 which represents 80.00% of the property value.

You will have to pay a monthly interest charge in the sixth year of £78.75.

This is calculated by firstly working out the total interest charge and then calculating 20.00% of that interest charge.

Please note that there are no interest charges for the first five years.

In the seventh year and in every year after that until the equity mortgages is paid back in full, the total interest charge is increased by the increase in RPI for the previous 12 months plus 1% and you will have to pay 20.00% of the increased interest charge.

For example, in the seventh year if the RPI is taken from September 2016 then the total annual seventh year interest charge would be increased by the published RPI figure of 2.90% plus 1% (a total of 3.90%) and you would pay 20.00% of that interest charge.

This would mean that the monthly interest charge you pay in the seventh year would be £81.82.

If you decide to redeem the equity mortgages you will pay back 20.00% of the market value. If you decide to sell then you will pay back 20.00% of the market value unless the sale proceeds
are greater in which case you will have to pay back 20.00% of the sale proceeds.

For example if you sell the property at the end of year one then on the assumption that the value of the property has increased by 5% you will pay back £56,700.00 In this example (assuming an annual 5% property price increase) the APR is therefore 3.98%. Please note that this is based solely on the capital sum repayable and does not take account of interest charges and any valuation fee payable on redemption.

As another example, if you sell the property at the end of year 7 then on the assumption that the value of the property has increased by 5% a year and that the RPI for year seven is the same as the RPI for year six (i.e. 2.90%) you will pay back a total of £76,965.28. In this example the APR is therefore 5.19%.

This is worked out by firstly assuming that the value of your home increases each year by 5% so the value of your home in year seven is £379,917.11 and you pay back 20.00% of that value
which is £75,983.42.

You will also pay back the interest charge in each of years six and seven of the loan. In the sixth year the interest will be 1.75% In each subsequent year the interest charge increase by 1.00%
plus RPI. If we assume that the RPI in the seventh year stays the same as it as at the date this worked example was calculated then the total amount of interest you have paid in each of the sixth and seventh years will be £945.00 and £981.86.

If the property is valued for the purposes of the sale or the redemption then you will have to pay the valuation fee.

stingey

kingstreet wrote: »

When you submit a PIF & Reservation for an HTB case, you get one of these back with the Authority to Proceed and a copy of the HTB Buyer's Guide;-

I thought after buying and selling houses I was pretty clued up on mortgages, but this is just confusing. The HTB info is full of assumptions. How many people read their mortgage terms and conditions? And how many read this?

An extra £80 a month is a fair wack to pay on top of your normal monthly payment.
What happens if the value decreases? Does the payments still go up?

Another question. If the government has 20% equity in the property do they have 2nd charge?

I think the old saying is true, if you don't understand it and it's not simple enough, avoid

AG47

Every year more HElp to bubble people will have their 5 years come to an end.

The numbers are staggering when you consider interest rates going back up to normal, and then they have to pay back the 20 or 40% on top of their mortgage

mayonnaise

stingey wrote: »

I thought after buying and selling houses I was pretty clued up on mortgages, but this is just confusing.

It's not confusing at all.

No interest first 5 years.
1.75% for year six.
1.75% + RPI + 1% from year 7 onwards.

AG47

When this help to bubble starts to have less affect what's next?

Will they offer 50% interest free for 5years or longer, and less than 5% deposit needed?

Jon_B_2

It!!!8217;s not linked to interest rates !!!55357;!!!56900;.

Currently my HTB payment would represent 10% of my mortgage payment.

Moot point anyway as I, like some of my neighbours already have done will remortgage at the end of the 5 years paying off the equity loan.

westernpromise

At which point, the monthly payment on the remortgaged amount could easily be less than the previous payments on the original mortgage.

The combination of HPI, and having paid off about 15% of the initial loan over the first five years, could be enough to take the borrower into the territory of lower LTV, cheaper-rate deals.

What HTB has proved is that being innumerate, suggestible, and pathologically averse to any sort of risk - a typical HPC reader, for example - are surefire paths to poverty.

The only surprise is that anyone finds that surprising.

Graham_Devon

westernpromise wrote: »

The combination of HPI, and having paid off about 15% of the initial loan over the first five years, could be enough to take the borrower into the territory of lower LTV, cheaper-rate deals.

The point being you can't just switch mortgages on a HTB purchase.

Plenty on this around the internet and on the financial times etc detailing the struggle people will have the re-mortgage.

What you state all sounds fine and dandy - but unfortunately isn't the reality of the situation.

AG47

Graham_Devon wrote: »

The point being you can't just switch mortgages on a HTB purchase.

Plenty on this around the internet and on the financial times etc detailing the struggle people will have the re-mortgage.

What you state all sounds fine and dandy - but unfortunately isn't the reality of the situation.

Help to bubble sounded great, and it was great for the first 5 years helping the bubble, but now the 5ys is up, the bubble is looking too if and easy to pop