Help to Buy Equity Loan - Scandal

JimmyDC

Hello
I just wanted to raise some concerns about the Government Help to Buy Equity Loans and see if anyone else is in a similar position or feels the same way. I purchased my first ever house at the age of 26, 3 years ago with my girlfriend, in Manchester City centre. We lived with parents for over a year and saved about £8k for a 5% deposit. House prices in MCR have rocketed in a very short space of time and although this may seem like good news, its actually going to make our home unaffordable to live in! I've been saving frantically the rate at which prices are rising means I'll never catch up and suddenly get hit with interest which will also keep going up! I didn't fully understand the equity loan scheme and I thought the amount I had to pay back was the 20% value of the house price, when we purchased it.

I feel like it's a huge scandal and massive scam from the government to take advantage of first time buyers and young people who have no other options. House prices are not going to go down! I think it'd have been better to get a 95% loan and the only option I can see is to remortgage in 2 years, when the prices will have risen even more, and end up with a massive monthly payment...

I know I'm not the only one who feels this way and I think we need to make some noise about it!

What can I do and what are everyone's thoughts?

robber2

Seems pretty clear from page 1 of the Governments own website that you pay back 20% of the selling price when you move on;


https://www.helptobuy.gov.uk/equity-loan/equity-loans/


Seems perfectly reasonable to me.



Rob

bearcat16

It’s neither a scandal nor a scam. It’s very straightforward, and the terms are absolutely clear, nothing hidden.

You refer to “young people who have no other options”, but you did have options. You could have continued living with your parents, rented privately, purchased a smaller house with no equity loan, purchased a property outside Manchester with no equity loan , etc etc.

If you did not properly read or make sure you understood the agreement before signing it, that is no-one else’s fault, and does not make help to buy a scam.

Surely you realised how important it was to fully understand such a large commitment?

But even so, you have several very viable options moving forward, all of which put you in a better position than if you’d simply rented during the 5 years.

Most people will simply remortgage after 5 years and pay off the equity loan with greater borrowing. Yes, house prices have risen, but you’ve also been paying off the mortgage in those 5 years, so the new payments may not be that much different from what you’re paying now. You’ll only know for sure when you get a valuation.

But even if (as you fear) you can’t afford new payments, you could simply sell the house. The government will take their 20%, and you’ll get 80%. Because house prices have risen, you’ll have earned substantial equity.

Let’s say for arguments sake that prices rose by 5% per year. Your house value is as follows:

Year 0 : £160,000
Year 1 : £168,000
Year 2 : £176,400
Year 3 : £185,220
Year 4 : £194,481
Year 5 : £204,205

Sell your house for £204k, the government will take 20% ( ~£40k), you get £163k. Your mortgage at the beginning was only £121k, you’ll have paid approx £18k off at the end of the 5 years, giving you a nice equity lump sum of around £60,000.

You can then put that equity towards a new house. You would not have had this £60k if you’d rented in that time.

£60k is a nice chunk of money, why do you feel so hard-done-by?

If you really want to make some noise, you should be shouting from the rooftops about how wonderful help-to-buy has been for you.

grumiofoundation

So your complaint seems to be that your house has gone up in value...?

You do understand that mortgages are paid based on the amount originally borrowed NOT on the current house price.

bigisi

JimmyDC wrote: »

Hello
I just wanted to raise some concerns about the Government Help to Buy Equity Loans and see if anyone else is in a similar position or feels the same way. I purchased my first ever house at the age of 26, 3 years ago with my girlfriend, in Manchester City centre. We lived with parents for over a year and saved about £8k for a 5% deposit. House prices in MCR have rocketed in a very short space of time and although this may seem like good news, its actually going to make our home unaffordable to live in! I've been saving frantically the rate at which prices are rising means I'll never catch up and suddenly get hit with interest which will also keep going up! I didn't fully understand the equity loan scheme and I thought the amount I had to pay back was the 20% value of the house price, when we purchased it.

I feel like it's a huge scandal and massive scam from the government to take advantage of first time buyers and young people who have no other options. House prices are not going to go down! I think it'd have been better to get a 95% loan and the only option I can see is to remortgage in 2 years, when the prices will have risen even more, and end up with a massive monthly payment...

I know I'm not the only one who feels this way and I think we need to make some noise about it!

What can I do and what are everyone's thoughts?

So you went ahead with something you didn't understand despite signing up for it and agreeing to the terms at the time and somehow this is someone else's fault?

Typical of the younger generation at the moment, always looking for someone else to blame even when the fault is entirely theirs.

DCFC79

JimmyDC wrote: »

Hello
I just wanted to raise some concerns about the Government Help to Buy Equity Loans and see if anyone else is in a similar position or feels the same way. I purchased my first ever house at the age of 26, 3 years ago with my girlfriend, in Manchester City centre. We lived with parents for over a year and saved about £8k for a 5% deposit. House prices in MCR have rocketed in a very short space of time and although this may seem like good news, its actually going to make our home unaffordable to live in! I've been saving frantically the rate at which prices are rising means I'll never catch up and suddenly get hit with interest which will also keep going up! I didn't fully understand the equity loan scheme and I thought the amount I had to pay back was the 20% value of the house price, when we purchased it.

I feel like it's a huge scandal and massive scam from the government to take advantage of first time buyers and young people who have no other options. House prices are not going to go down! I think it'd have been better to get a 95% loan and the only option I can see is to remortgage in 2 years, when the prices will have risen even more, and end up with a massive monthly payment...

I know I'm not the only one who feels this way and I think we need to make some noise about it!

What can I do and what are everyone's thoughts?

The bit in bold is whats important here.
Did you not seek advice on it ?
I'm sure you were given the chance to ask questions on anything you werent sure about.

No scam or scandal here, if you feel so strongly about it then speak to your local mp about it, why would you do that when if you look on the bright side you have your own property, moved out of your parents house which is good right, well it is in mine and many other peoples opinion.

kingstreet

So when you sell/redeem the Government gets 20% of the growth in the value of your home and you get only 80%? Seems fair.

If you don't sell or redeem, after five years, the Government fee payments start and they are based on 1.75% of the original loan amount, not the increased property value. Also seems fair.

Did you read the HTB Buyer's Guide before proceeding? Did you read the Personal Worked Example sent to you by the HTB Agent with the Authority To Proceed?

Silver_Queen

As a 25 year old planning to buy using Help to Buy...it is very clear that you pay back 20% of the price when you sell the property. You can't blame anybody but yourself for not understanding the terms properly.

Exodi

I have no doubts you'd make exactly the same thread if house prices had gone down. Would you feel it's unfair you're paying back less than you borrowed? Would you 'make some noise' then?

You're also one of the first people I've witness that has managed to turn their house going up in value into a negative.

I personally think the scheme is overly generous to the extent it is abused by private businesses.

dealer_wins

Dont think the OP will be back somehow!

DCFC79

dealer_wins wrote: »

Dont think the OP will be back somehow!

No I don't think so, they posted just after midnight, not a good time to post.