First time buyer - HTB scheme query

Adsyy22

Evening and Happy Holidays everyone!

First time home buyer here looking to move out after the new year now that I have some savings, I will be moving out on my own and looking for some guidance with mortgage/fees/help to buy scheme.

I have my eyes set on a new build property costing 218k which is offering the standard help to buy equity 20% loan thing as they're properties aimed at new home owners. I currently have 21k saved (as that was going to be my initial deposit without fees etc) and I bring home roughly 31k per year after tax. Using the help to buy I'm hoping it means I can move out quicker and still have money behind me, after using my 5% (around 10k savings) for furtniture/mortgage fees/ general savings.

Could anyone advise if the HTB equity loan is worth it in the long run? As after working out my outgoings/estimated bills I should have around £800 left over a month and was thinking of setting up a second bank account/paying monthly £350 to the loan during the five years of no interest in attempts of paying as much of as possible before the interest hits it on year six.

Does this sound like a viable option? Does anyone know how much the interest affects it after year 5? And can the homeowner choose how much to pay monthly into the equity loan after year 5?
Sorry for the long post and most likely stupid questions, just very indecisive as there will be no turning back once the button is hit! Any help at all is appreciated, thank you all

yllop1101

There is a help to buy guide which explains all of this.
A few things, you can't just pay the loan off monthly, you can only pay off 10% of the house value at one time. So you'll have to save monthly in an account, then when you have a sizable chunk saved, get the house valued (at your own cost) and then you pay 10%. There's multiple threads about the difficulty some people have had with trying to pay it off.

The interest is set at rpi, again, the guide explains this. You really need to fully read it to understand more about the scheme you're proposing to use.

chanz4

solicitors fees are about 1k as well

Byzar

yllop1101 wrote: »

There is a help to buy guide which explains all of this.
A few things, you can't just pay the loan off monthly, you can only pay off 10% of the house value at one time. So you'll have to save monthly in an account, then when you have a sizable chunk saved, get the house valued (at your own cost) and then you pay 10%. There's multiple threads about the difficulty some people have had with trying to pay it off.

The interest is set at rpi, again, the guide explains this. You really need to fully read it to understand more about the scheme you're proposing to use.

Hi,

The equity loan can't be paid monthly?

aries_163

https://www.myfirsthome.org.uk/iwantto/staircase/

See this website

aries_163

I used HTB and it worked out well for me. My property increased significantly in value over 2.5 years and I was able to sell with a nice lump of equity that enabled me to move up the property ladder.
But what I would advise looking back at my own experience is :

1) still put as much deposit % down as possible. You can put down more than the 5%, and do so if you can afford to.

2) take the maximum mortgage you are comfortable with/ can afford.

3) take the lowest amount of equity loan % as is possible. If you don’t need to take the full 20%, then don’t. I’d personally use it to just bridge the gap on affordability, so if that ends up being an 11% equity loan then go for that.

Others might disagree, but this is just my thoughts.

Adsyy22

aries_163 wrote: »

I used HTB and it worked out well for me. My property increased significantly in value over 2.5 years and I was able to sell with a nice lump of equity that enabled me to move up the property ladder.
But what I would advise looking back at my own experience is :

1) still put as much deposit % down as possible. You can put down more than the 5%, and do so if you can afford to.

2) take the maximum mortgage you are comfortable with/ can afford.

3) take the lowest amount of equity loan % as is possible. If you don’t need to take the full 20%, then don’t. I’d personally use it to just bridge the gap on affordability, so if that ends up being an 11% equity loan then go for that.

Others might disagree, but this is just my thoughts.

Thanks for your response, I've tried to do my share of research on the equity loan but I'm incredibly indecisive due to not knowing anyone personally that has/is using it. I'm glad it worked out for you so well! I think judging from others posts on this forum, and the link provided in the post above, I should be fine to go ahead with HTB providing I'm sensible with the property chosen and the amount borrowed, thanks for enlightening that I can choose how much to borrow! Every post/scenario I've read has the 20% point thrown in my face so figured that was set in stone.

Pixie5740

Byzar wrote: »

Hi,

The equity loan can't be paid monthly?

No, it can't.

https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdf

aries_163

No problem, I hope it helps.
Other things to keep in mind, as there are pitfalls/ things to seriously consider before committing to HTB:

- currently, I believe there is a limited number of lenders offering remortgage options if the HTB loan is still in place. So think about the length of fixed term you would take out initially.

- there are fees to staircase / redeem the HTB loan, take a look at some of the links on the website I posted. When you want to staircase/ redeem you will need to pay for a RICS survey (£200ish), HTB admin fees (was £250 when I did it), your legal fees. It all adds up!

- instead of saving into a seperate account, maybe look to overpay your mortgage each month so you build up more equity and then can hopefully redeem the HTB loan by incorporating it onto your mortgage when you come to remortgage, eg in 5 years time or whenever your initial fixed term is up.

Even though I used HTB and had a positive experience, if you can afford to buy without it, do so.
Or like you say, be sensible with the type of property/ purchase price. I think HTB can work really well for starter homes (I bought a 2 bed flat in a cheap area!!) as the equity loan isn’t really that much in the grand scheme of things (mine was taken out for £14k). I think people could realistically save up to redeem that amount over time. But when you look at the schemes in London when people can take up to 40% of an £600k house! That is a huge amount of money, which sees people buying homes they can’t actually ever afford - just doesn’t quite seem right to me.

missplant

hello, i currently have the help to buy loan and plan to re-mortgage into our current mortgage in two years time. so far its worked well for us as we have managed to get on the ladder at a young age and have had job promotions, which im hoping will help when re-mortgaging we also have £2,000 saved by for the fees and have been making over payments.

kingstreet

You'll either get a further advance from your existing lender to repay the HTB loan, or you will remortgage to a new lender to raise enough to repay your current mortgage and the HTB loan.

You can't "remortgage into our current mortgage."