Help to Buy - watching a car crash

Smellyonion

avacapri wrote: »

The mortgage company dont care they have the first charge on the property at 80% loan to valuation
and if the property does go down its the buyer that will lose out first

as I understand it if the buyer has 5% on a property purchase 200k and takes out 20% HTB
40k FROM GVT
10k SAVINGS
150K MORTGAGE

say the house is overpriced and has fallen 10% (reports say this is conservative) and the buyer manages to sell

sale price £180
mortgage company get their 150k back first
the government want 20% back to the gvt - 36K
total £186k not enough to go around and the seller has lost their initial deposit, the government still want the money back so the seller is left with a loan of 6k.

my view is that the scheme is a potential nightmare

This assumes the buyer has bought and sold the house with no capital repayment or sold it right after purchase. Anybody will lose money in such a scenario. Banks will not lend an interest only mortgage on a HTB.

I purchased via HTB because it was cheaper than renting so i gain even if the house remains flat in value.

Take my 250k property flat in the south east.

I was paying 1k a month a month rent
I now pay 720 (including ground rent, service charge etc) fixed for 5 years.

Thats 280 pm saving for 5 years = 16.8k
My gas/elec bill is 20pm cheaper due to efficiency, adding another 1.2k. So that is 18k saving just in the difference from rent alone and the rent was set to increase year on year. By 5 years time, i would have repaid 17.5k from capital repayments.

In total, even if i sell for the same price in 5 years (250k) (very unlikely), i am 35k better off from rent savings and capital repayments. It will likely be valued at 280 to 300k, then i will be 75k better off.

Both of these scenarios, i would be better off.

The value would have to crash to around the 190k to not be better off in 5 years time vs renting. Very very unlikely.

Hutch100uk

avacapri wrote: »

The mortgage company dont care they have the first charge on the property at 80% loan to valuation
and if the property does go down its the buyer that will lose out first

as I understand it if the buyer has 5% on a property purchase 200k and takes out 20% HTB
40k FROM GVT
10k SAVINGS
150K MORTGAGE

say the house is overpriced and has fallen 10% (reports say this is conservative) and the buyer manages to sell

sale price £180
mortgage company get their 150k back first
the government want 20% back to the gvt - 36K
total £186k not enough to go around and the seller has lost their initial deposit, the government still want the money back so the seller is left with a loan of 6k.

my view is that the scheme is a potential nightmare

If the house price has fallen, assuming you can get it valued at that price, you only pay back 20% of the lower amount to HTB.

Hutch100uk

My experience of HTB... I used it to buy a much bigger house than I could have normally afforded. My and my partner (now ex) had been renting for years and struggled to raise a deposit. We wanted stability for the kids as our landlords kept selling the houses we were renting.
We didn't have cash to 'do a house up' either and in our area, most houses in our price range needed lots of work.
So, we decided on a new build.
Separated soon after and put the house on the market. Yes it too AGES to sell and sold it for nearly £6k less than we paid (not bad considering).
I actually paid back £1k less to the HTB scheme as my house was valued lower so I came out of it ok in the end.

I agree about service charges though. We had massive problems trying to find out what these were going to be when my buyer's solicitor was enquiring. Lets just say it was more than double what the developer said it would be!!

So, generally the scheme worked ok for me although you need to go into it with your eyes open. They also charge you for paying off the HTB loan before the 5 years is up!!

kingstreet

Hutch100uk wrote: »

They also charge you for paying off the HTB loan before the 5 years is up!!

Those charges are payable on redemption at any time, not because you were redeeming within the first five years;-

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

See the downloadable customer information pack, page 9.

Crashy_Time

Smellyonion wrote: »

This assumes the buyer has bought and sold the house with no capital repayment or sold it right after purchase. Anybody will lose money in such a scenario. Banks will not lend an interest only mortgage on a HTB.

I purchased via HTB because it was cheaper than renting so i gain even if the house remains flat in value.

Take my 250k property flat in the south east.

I was paying 1k a month a month rent
I now pay 720 (including ground rent, service charge etc) fixed for 5 years.

Thats 280 pm saving for 5 years = 16.8k
My gas/elec bill is 20pm cheaper due to efficiency, adding another 1.2k. So that is 18k saving just in the difference from rent alone and the rent was set to increase year on year. By 5 years time, i would have repaid 17.5k from capital repayments.

In total, even if i sell for the same price in 5 years (250k) (very unlikely), i am 35k better off from rent savings and capital repayments. It will likely be valued at 280 to 300k, then i will be 75k better off.

Both of these scenarios, i would be better off.

The value would have to crash to around the 190k to not be better off in 5 years time vs renting. Very very unlikely.

Do you have a link to the type of flat you were paying 1k a month to rent?

Smellyonion

Crashy_Time wrote: »

Do you have a link to the type of flat you were paying 1k a month to rent?

Similar to this https://www.zoopla.co.uk/to-rent/details/38759569?search_identifier=09c6cf125bc7232f4241a26767a2bc74
Same area, similar size by £350 cheaper.

Crashy_Time

Smellyonion wrote: »

Similar to this https://www.zoopla.co.uk/to-rent/details/38759569?search_identifier=09c6cf125bc7232f4241a26767a2bc74
Same area, similar size by £350 cheaper.

Not surprised that one is empty.

markin

If new homes did go up 30-50k overnight when it came out as some members here say, then that increase will always filter out to older homes in the area, and then rinse and repeat, people will always want to match the new home price to within 20k or as close as they can get, and developers will always want a premium price over older homes.

Some chart may help....

WOW, i was not expecting it to line up so well. It looks like it rocketed.



http://landregistry.data.gov.uk/app/ukhpi/browse?from=2001-03-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=2019-03-01