The Help to Buy calendar lottery - how buying a home on the 'wrong' day can cost you £1,000s - MSE

edited 30 November -1 at 1:00AM in Mortgages & Endowments
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MSE_CallumMSE_Callum Forumite
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edited 30 November -1 at 1:00AM in Mortgages & Endowments
A bizarre quirk of the Help to Buy home buyers' scheme could end up costing you - or saving you - up to £5,000, depending on which month your purchase falls...
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'The Help to Buy calendar lottery - how buying a home on the 'wrong' day can cost you £1,000s'
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  • edited 30 May 2019 at 4:13PM
    getmore4lessgetmore4less Forumite
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    edited 30 May 2019 at 4:13PM
    On a £240k with 4% of 1.75% over a year that's £168 extra in the first year.

    On 25 year so 21 left repayment even compounding the 4% I would be very surprised it gets anywhere near £4,750 you have in the article

    Show your workings

    I will do mine later.

    (might get there if you use interest only over 21years)
  • edited 30 May 2019 at 8:24PM
    amnblogamnblog Forumite
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    edited 30 May 2019 at 8:24PM
    Sounds like Moneysaver Michael from Billinghurst thinks paying an extra £40 a year in interest is not fair.

    Let’s hope he considers the Tax Payer putting £56,000 into him owning his own home at a cost of £60 to date is a little fairer.

    A buyer keeping the equity loan for 25 years is surely missing the point,
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • edited 31 May 2019 at 4:57AM
    getmore4lessgetmore4less Forumite
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    edited 31 May 2019 at 4:57AM
    lets look at what has been said
    How the 'calendar lottery' creates Help to Buy winners and losers

    We've crunched the numbers on varying loan sizes up to the maximum £240,000, assuming the loan is paid back over 25 years – five of which would be interest-free – and assuming the rate rises by 4% each year.

    you could be thinking from that that the loan is repaid over the 25 years and the calculations are based on that.

    They get for the £240k case
    loan........high........low.........difference
    £240,000 £129,403 £124,643 £4,760

    But that is based on interest only

    doing it with the rate change at the beginning and end of each year rather than month by month changing in April you get a higher number but same ball park and keeps it simpler.

    interests only
    loan........high........low.........difference
    £240,000 £130,071 £125,068 £5,003

    by the last year your rate is 3.7-4% and your payment around £9k for the year.

    Still owing the HTB equity which could be more or less than the £240k you started with


    OK with HTB you can't doi repayment but for illustration....
    If you take the 5 years interest free interest only and then go repayment for 20years on HTB rate terms
    loan........high.......low......difference
    £240,000 £61,767 £59,210 £2,557

    Mortgage paid off not, so scary on a £240k debt
    the repayment range is £1190pm-£1300pm even with the rate creeping up.

    The real HTB lottery is the house value and what you owe when you try to pay it off.

    YBY details If someone wants to check)
    Interest only

    .....rate change ....interest only interest
    .Y.....start...end....start...........end
    .0 1.82% 1.75% £4,368.00 £4,200.00
    .1 1.89% 1.82% £4,542.72 £4,368.00
    .2 1.97% 1.89% £4,724.43 £4,542.72
    .3 2.05% 1.97% £4,913.41 £4,724.43
    .4 2.13% 2.05% £5,109.94 £4,913.41
    .5 2.21% 2.13% £5,314.34 £5,109.94
    .6 2.30% 2.21% £5,526.91 £5,314.34
    .7 2.39% 2.30% £5,747.99 £5,526.91
    .8 2.49% 2.39% £5,977.91 £5,747.99
    .9 2.59% 2.49% £6,217.03 £5,977.91
    10 2.69% 2.59% £6,465.71 £6,217.03
    11 2.80% 2.69% £6,724.34 £6,465.71
    12 2.91% 2.80% £6,993.31 £6,724.34
    13 3.03% 2.91% £7,273.04 £6,993.31
    14 3.15% 3.03% £7,563.96 £7,273.04
    15 3.28% 3.15% £7,866.52 £7,563.96
    16 3.41% 3.28% £8,181.18 £7,866.52
    17 3.55% 3.41% £8,508.43 £8,181.18
    18 3.69% 3.55% £8,848.77 £8,508.43
    19 3.83% 3.69% £9,202.72 £8,848.77

    Total................£130,070.65.£125,067.93 difference £5,002.72


    repayment start/end pairs as above for amount borrowed payment interest YbY rates used as above
    (can't be bothered to format)

    £240,000.00 £240,000.00 £1,193.77 £1,185.91 £4,284.52 £4,119.15
    £229,959.32 £229,888.24 £1,201.59 £1,193.40 £4,264.88 £4,098.98
    £219,805.13 £219,666.45 £1,209.35 £1,200.83 £4,234.49 £4,068.44
    £209,527.38 £209,324.92 £1,217.04 £1,208.19 £4,192.21 £4,026.44
    £199,115.11 £198,853.13 £1,224.62 £1,215.44 £4,136.80 £3,971.80
    £188,556.45 £188,239.67 £1,232.07 £1,222.56 £4,066.88 £3,903.22
    £177,838.44 £177,472.11 £1,239.36 £1,229.54 £3,980.93 £3,819.24
    £166,947.00 £166,536.93 £1,246.46 £1,236.32 £3,877.27 £3,718.29
    £155,866.72 £155,419.38 £1,253.33 £1,242.88 £3,754.06 £3,598.61
    £144,580.80 £144,103.37 £1,259.94 £1,249.19 £3,609.24 £3,458.26
    £133,070.80 £132,571.31 £1,266.23 £1,255.21 £3,440.55 £3,295.10
    £121,316.55 £120,803.92 £1,272.18 £1,260.88 £3,245.47 £3,106.77
    £109,295.88 £108,780.09 £1,277.72 £1,266.17 £3,021.19 £2,890.61
    £96,984.39 £96,476.61 £1,282.81 £1,271.03 £2,764.59 £2,643.70
    £84,355.21 £83,867.91 £1,287.40 £1,275.40 £2,472.20 £2,362.79
    £71,378.65 £70,925.85 £1,291.41 £1,279.23 £2,140.12 £2,044.21
    £58,021.86 £57,619.30 £1,294.79 £1,282.45 £1,763.99 £1,683.92
    £44,248.43 £43,913.83 £1,297.46 £1,284.99 £1,338.94 £1,277.34
    £30,017.89 £29,771.24 £1,299.35 £1,286.80 £859.45 £819.37
    £15,285.18 £15,149.06 £1,300.38 £1,287.78 £319.33 £304.25

    Total interest £61,767.12 £59,210.49 £2,556.62
  • Kentish_DaveKentish_Dave
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    This is completely ignoring the time value of money. I know that a site like this will not be able to employ people with good numerate degrees, but seriously, this is just awful.

    If you do not understand numbers then please, don’t try to write about them.

    Callum, are you willing to apologise and have another try with the right numbers?
  • getmore4lessgetmore4less Forumite
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    This is completely ignoring the time value of money. I know that a site like this will not be able to employ people with good numerate degrees, but seriously, this is just awful.

    If you do not understand numbers then please, don’t try to write about them.

    Callum, are you willing to apologise and have another try with the right numbers?

    If you think this is bad you should see the shocker from last year
    recommending the wrong mortgage from the examples.

    https://www.moneysavingexpert.com/news/2018/07/four-in-10-mortgages-now-fee-free---but-dont-get-sucked-in/

    covered in two threads.
    https://forums.moneysavingexpert.com/showthread.php?t=5873406
    https://forums.moneysavingexpert.com/showthread.php?t=5874729
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