Help to Buy Deposit Question

Praetorian345

Hi

I'm a first time buyer looking to buy a new build flat.

My maximum mortgage is 90k.

The property I'm interested in is 190k, so I thought that the breakdown would be as follows:

Mortgage 90k
Deposit 62k
Help to Buy 38k

I've been told by a mortgage advisor that i'd actually need a deposit closer to 78k. I've worked out that they're calculating the help to buy amount as (property value-deposit) x20%, whereas I assumed it was just a straight 20% of property value.

I've seen other postings (admittedly from a few years ago) which suggest I am right.

Is anyone able to comment?

Thanks in advance.

Captainfox

As I’m going through the process myself I may be able to throw in my two pence. From what I understand it’s worked out on your affordability of what you bring in and if you will be able to pay back the mortgage and the interest on the equity loan if you don’t pay it off before the 5 year mark. Essentially your debt to income ratio can’t be more than around the 40/50% mark (it’s more stringent through help to buy than a mortgage lender)

So if you’ve got other debts or regular costs you will have to raise a bigger deposit and have a smaller mortgage amount to meet the affordability criteria. I may and am likely wrong but that’s what happened in my circumstances. I had to raise slightly over 10% on a 290k property in order to meet the eligibility for the help to buy.

amnblog

Do confuse the maximum mortgage from a Lenders affordability calculation with the maximum mortgage under the Help To Buy Equity loan affordability calculation. Your deal needs to fit on both.

I suspect your Broker has simply made a poor job of explaining that you need to increase your deposit to meet H2B affordability on this purchase.

Praetorian345

Thanks both for your responses.

I can't see that it's a Help to Buy affordability issue (if you're referring to the debt to household income ratio), as I appear to be within that.

Any other suggestions?

amnblog

It is either a H2B affordability issue ( debt to income or income multiple), or mortgage affordability, or mortgage credit scoring.

Ask the Broker which.