Help to buy......Should I

RahBish

Hello


I was after some help. I am really interested in some new properties in the area but i think i can only afford one with help to buy.


While on the surface it seems great I am just wondering what if any issues other people have had at the end of the 5 years? I just feel nervous about comitting to it. i am also speaking to a financial advisor but just wanted to get some views from people that have taken them out.


thanks in advance


Sarah

Gwendo40

Yes on the surface it does seem ''great''... great for the house builders, their profits and their CEO's bonuses, all at the expense of buyers turning themselves into lifelong mortgage debt slaves constantly worrying about every slight rise in interest rates.

https://forums.moneysavingexpert.com/discussion/5985826/help-to-buy-interest-rate-rise

letitbe90

Gwendo40 wrote: »

Yes on the surface it does seem ''great''... great for the house builders, their profits and their CEO's bonuses, all at the expense of buyers turning themselves into lifelong mortgage debt slaves constantly worrying about every slight rise in interest rates.

https://forums.moneysavingexpert.com/discussion/5985826/help-to-buy-interest-rate-rise

It is shocking that a loan that actually increases in line with an assets valuation, was introduced by the government. It really is a scam. You have to pray your house doesn’t go up in value before you pay off the equity loan if you don’t want to be potentially paying more money back than what the house was worth originally...

poppy10_2

Help to Buy is a scam, designed to help housebuilers. It screws rather than helps buyers as they end up paying inflated prices. Meanwhile the CEOs of housebuilders are earning 110million pound bonuses paid for by the taxpayer.



https://www.theguardian.com/business/2018/jan/09/persimmon-profits-chief-bonus-scheme

Sempah

letitbe90 wrote: »

It is shocking that a loan that actually increases in line with an assets valuation, was introduced by the government. It really is a scam. You have to pray your house doesn’t go up in value before you pay off the equity loan if you don’t want to be potentially paying more money back than what the house was worth originally...

People only see it as a scam if the loan isn’t payed back before the interest rate becomes more than the mortgage borrowing rate. Before taking the H2B out, the buyer should make an action plan on how they are going to buy out the equity that the government hold. Also, the loan only increases with the price of the house, which you still have 75% equity in, so selling the house and moving to another property if the house price skyrockets will not be a problem. E.g house is worth 400K, 80K H2B, 20K deposit, 300K mortgage. For arguments sake let’s say the house price doubled and you decided to sell the next day. Repay £160K H2B, pay off 300K mortgage. Leaves you with £140k equity. So not sure how you work out that the buyer is worse off. The loan is always 20% and your equity will always be 80% of future house price rices. The concerting thing is if the house prices crash. All of a sudden you may be in negative equity with an equity loan.
So top tip, use H2B and overpay!

csgohan4

Sempah wrote: »

People only see it as a scam if the loan isn’t payed back before the interest rate becomes more than the mortgage borrowing rate. Before taking the H2B out, the buyer should make an action plan on how they are going to buy out the equity that the government hold. Also, the loan only increases with the price of the house, which you still have 75% equity in, so selling the house and moving to another property if the house price skyrockets will not be a problem. E.g house is worth 400K, 80K H2B, 20K deposit, 300K mortgage. For arguments sake let’s say the house price doubled and you decided to sell the next day. Repay £160K H2B, pay off 300K mortgage. Leaves you with £140k equity. So not sure how you work out that the buyer is worse off. The loan is always 20% and your equity will always be 80% of future house price rices. The concerting thing is if the house prices crash. All of a sudden you may be in negative equity with an equity loan.
So top tip, use H2B and overpay!

Disagree, You will always pay back more than you loaned for the HTB loan which is a scam imo, as you pay back a % of the house price


If you can afford it, don't use HTB

RahBish

Thank for the answers so far, i wouldnt have to borrow the full 20% more like 5 or 10 so it makes me slithgly less concerend but i have a lot to think about


Thanks All

Sempah

csgohan4 wrote: »

Disagree, You will always pay back more than you loaned for the HTB loan which is a scam imo, as you pay back a % of the house price


If you can afford it, don't use HTB

Yes you pay the 20% back of the house price.
400k house pay back 20% is 80K
Say th house increased to £500k, you pay back 100K. Yes 20k more, but you have made 80% of the increase in profit.

The people who disagree with it believe that they should receive the 20% equity loan from the government and then only ever pay the original amount back with no interest incurred. If that was the case everybody would do it as it’s completely risk free.

H2B has helped loads of people onto the property ladder and has worked out fine for them. I know someone personally who purchased their home through H2B, after 3 years have remortgaged and paid it off. They are now looking to move into a much larger home because of the equity they have.

As long as you do all the figures and work out the worst case scenario, you will be fine. Basically overpay on the mortgage in case the house prices decide to drop slightly.

Sempah

RahBish wrote: »

Thank for the answers so far, i wouldnt have to borrow the full 20% more like 5 or 10 so it makes me slithgly less concerend but i have a lot to think about


Thanks All

I don’t think you have an option to just take 5% or 10%. You have to take the full 20%, however you can add more depsoit than 5%.

kingstreet

It's 10% to 20% in complete 1% increments.

13% is possible, 16.2% isn't.