Help 2 Buy is it a good idea??

Legacy_user

I am a ftb and my partner is not although he doesn’t own a property at the moment. We have been in rented for years and are desperately squirrelling money away for a deposit. For the home we need for us and our children in our area we are looking at £20/30k. I have slightly adverse credit so we are looking at 10/15%. This is a mammoth amount for us and if we are honest with ourselves it could take us years to get to that.

I’ve got friends that have used the H2B scheme but something about it worries me. I’ve even spoken to brokers who have said they won’t touch H2B which kind of reaffirmed my worries. How do people pay that money back?

I’d much rather do it all the traditional way but as we are both in our 30s I fear we are running out of time.

Retired_Mortgage_Adviser

Like everything else, H2B has it's pluses and minuses but I'm unclear as to what your reservations are. What specifically are you afraid of?

You don't "have" to pay back the equity loan in one go, the MSE website has a great guide on how H2B works, might help to have a look at it.

amnblog

The longer you wait, the less time you have to pay the mortgage back, and since property prices tends to rise, the more your home will cost you.

foxy-stoat

Your better off buying a cheaper house then building up to a bigger one once you get rolling in the whole of home ownership.

H2B is putting you into a house that maybe you cannot afford, unless you have a plan to clear the equity loan in year 6 or you can budget well enough and the house prices are in the upward trend you can remortgage in year 6, but H2B is on new builds where the value isn't guaranteed to increase.

Andysandy

Given that you are already in your 30s, the longer you wait, the harder it will get due to a ceiling on mortgage term.

Paying off the 20% equity loan -

1. If you have sufficient equity in the property and a good credit history, at the end of 5 years you could remortgage and pay off the equity loan. Of course this is subject to a lot of things - your financial circumstances at the time, house prices, lending regs, etc

2. If you can't do the above, the 20% equity converts into an interest-charging loan and you pay it as described in the post above. You will end up with a quasi-95% LTV mortgage with two parts charging different interest rates.

Beware, depending on the area and potential for growth, lots of H2B new builds (especially flats) lose a lot of value soon as they are bought. Imho, H2B artificially inflates new build prices, but that's a different conversation altogether.

You say you have "slightly adverse" credit. What do you mean exactly? Have you talked to a broker to see what options might be available for you? There are plenty of 95% LTV products on the market right now and intense competition for borrowers, you might well be surprised to see what's on offer.

MissSJL wrote: »

How do people pay that money back?

getmore4less

As shown the rates on the H2B loan are currently estimated to be in line with mortgage rates.

For many the primary hurdle is the deposit which means high rate on the bigger loan due to poor LTV.

The advantage of H2B with a 5% deposit against a regular 95% LTV loan -
20% interest free for 5 years
75% on a much lower rate(H2B 75%LTV)

Downside is the loan may go up as it is 20% of value

Crunch some numbers for a place against continuing to rent.
Key being what it costs to rent the money(not the payment).

if you have 5% then rent+current savings rate may get you a better home now for the same money.

saving up or remortgaging to pay back the H2B are not the only options

if you can afford or predict you can afford the mortgage + the interest on the H2B when it kicks in then you can have a plan beyond the 5 years it is interest free.

What's your rent?
How much would a suitable house cost?
How much are you saving each month?
How much do you have saved.