Help to buy hummer after 25 years

Rocksolid

Hello,


If I've got it correctly, with an equity loan to buy an house of 20%, after 25 years it's a damn hammer on my head, if I consider how the house prices have grown in the previous 25 years, it will be almost 2.5 times to pay to the government, can you please confirm?


That makes sense only if I'll be able to clear the 20% equity in 5 years, or max 10, considering that is always subjected to a big raise.



Regards.

csgohan4

it's a scam imo, you pay the government usually more than you lend, as it is a percentage of the house.


Also as it's only available for new builds, which are usually vastly over priced, your going to be in a lose lose


but for some people it suits them, but getting on the property ladder at any cost is false economy

foxy-stoat

You need to crunch the numbers, but you should be looking to save up at least half of the equity loan at the end of year 5 and staircase the rest by remortgaging.

If you cant you may as well just get a 95% mortgage in the first place.

RelievedSheff

This will be the next big housing scandal!

We already know of people who have no idea what they are going to do in a couple of years when they have to start repaying their HTB loan.

foxy-stoat

RelievedSheff wrote: »

This will be the next big housing scandal!

We already know of people who have no idea what they are going to do in a couple of years when they have to start repaying their HTB loan.

At least there will be paperwork to cover the agent's behind when the poor saps get round to understanding what they sign up to.

RelievedSheff

foxy-stoat wrote: »

At least there will be paperwork to cover the agent's behind when the poor saps get round to understanding what they sign up to.

Indeed.

They really won't have anyone to blame bar themselves.

Rocksolid

So I saw it right .
Can I pay in my comfortable time after the 5 years? Or the clock sounds at 5-10-20-30 years? For example, is it possible after 7 years?



Anyway the amount due is very high in only 5 years, probably it will be cheaper a 95% mortgage if I won't be able to pay it in 10 years max.


I agree with you guys, it's also not explained well in the way the people can understand, I've read at least 10 articles before to have doubts about these interests .

Exodi

RelievedSheff wrote: »

Indeed.

They really won't have anyone to blame bar themselves.

Sadly not how these forums work, I'm already pre-empting threads of:

'MIS-SOLD MORTGAGE, COMPENSATION???'

I'd imagine most will re-mortgage to include the HTB loan.

csgohan4

The problem is you won't have a 20% guaranteed increase in equity in 5 years time, once you open the door to your new house, it would have dropped in price much like a new car.

Exodi

csgohan4 wrote: »

The problem is you won't have a 20% guaranteed increase in equity in 5 years time, once you open the door to your new house, it would have dropped in price much like a new car.

Actually on reflection, you're right. Due to amortisation, chances are they'd have only paid off closer to 10% of the principle at the 5 year mark which means even if they could remortgage the house at the value they previously paid for it, they'll already need to increase their borrowing - which is compounded by going up an LTV band etc.

As you said, should the house be valued at less than it was originally purchased (which isn't unlikely) there could arise the situation where the borrower is unable to meet affordability criteria to increase their borrowing to satisfy the help to buy equity loan.

That said, the interest rate only looks concerning a long way into the mortgage so this issue should hopefully not be an issue in 10-20 years.

foxy-stoat

Rocksolid wrote: »

Can I pay in my comfortable time after the 5 years? Or the clock sounds at 5-10-20-30 years? For example, is it possible after 7 years?

Anyway the amount due is very high in only 5 years, probably it will be cheaper a 95% mortgage if I won't be able to pay it in 10 years max.

I agree with you guys, it's also not explained well in the way the people can understand, I've read at least 10 articles before to have doubts about these interests .

You can pay at anytime but you can only pay 50% or 100% of the loan + any increase in property value + fees maybe tax.

Its not a hidden scam or mis-leading selling though, its is an equity loan - interest free for the first 5 years then interest is added, low at first then increasing each year, this is explained in the documents I have read.

So for a £250,000 property instead of paying for a £237,500 mortgage and owning 100% of the equity you will be making payments on a £187,500 mortgage and "losing" 20% of any equity, but if the property decreasing in value you would of saved 20% of the loss.

Very rough figures your monthly mortgage payments could be £350 less, so if you save the difference then you could have £21,000 at the end of year 5 plus interest that you could earn that would go towards paying half of the equity loan back in year 6.